CLEAN INVESTMENTS PTY LTD v FC of T
Members:J Block SM
Tribunal:
Administrative Appeals Tribunal
MEDIA NEUTRAL CITATION:
[1999] AATA 764
J Block (Senior Member)
Part A - Introductory and general
1. There are two objection decisions which were, with the consent of the parties, heard together. Specifically in this regard:
- (a) The Applicant made an application for a refund (``the first refund claim'') of sales tax in an amount of $189,983.59, pursuant to an application dated 15 April 1993, in respect of the period 1 April 1990 to 31 March 1993. That refund application was
ATC 2373
disallowed pursuant to a letter dated 14 July 1993 and the Applicant objected to that decision on 9 April 1993. Subsequently, and by notice dated 19 December 1997, the objection was allowed in part only and the objection decision referable to the first refund claim was heard by the Tribunal in respect of the remainder (NT98/149). - (b) The Applicant made an application for a refund (``the second refund claim'') of sales tax in an amount of $543,223.00 pursuant to an application dated 21 June 1996 in respect of the period 1 May 1993 to 30 April 1996. That refund application also was disallowed pursuant to a letter dated 10 August 1998 and the Applicant objected against that decision on 11 August 1998. The objection was allowed in part only on 11 August 1998 and the objection decision referable to the second refund claim was heard by the Tribunal in respect of the remainder (NT98/415).
2. Mr J Andrew Higgins of Counsel, instructed by Taylor Wharton & Associates, appeared for the Applicant. Mr David McGovern of Counsel, instructed by the Australian Government Solicitor, appeared for the Respondent. The Tribunal had before it the T Documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 and in addition received into evidence a large number of exhibits as follows:
- • Exhibit A1 is a statement by Mr Peter Jay, a director and the chief executive officer of the Applicant (and also Richard Jay Laundry Equipment Pty Limited and Jay Laundry Rentals Pty Limited) dated 12 October 1998. Exhibit A1 must be considered in conjunction with a number of large box files containing numerous annexures which are referred to in accordance with their tab numbers in the relevant box files; an annexure as referred to in these Reasons which is preceded by the letters PJ refers to an annexure in a box file and which is referred to in the statement by Mr Jay.
- • Exhibit A2 is a further statement by Mr Jay dated 9 December 1998; it too refers to a box file of annexures separately designated by the letters PJ.
- • Exhibit A3 is a statement by Mr Anthony Robinson dated 9 October 1998; Mr Robinson is in the employ of Richard Jay Laundry Equipment Pty Limited as sales executive for southern New South Wales; his statement also refers to annexures in box files separately designated by the letters TR.
- • Exhibit A4 is a statement by Mr Gordon Lindsay dated 15 October 1998. Mr Gordon Lindsay is a director and the chief executive officer of Imported Coin-Op Washers & Dryers Pty Limited and Speed Queen Commercial Laundry Equipment Pty Limited; this group imports Speed Queen washers and dryers.
- • Exhibit A5 is an extract from the Macquarie Dictionary Revised Edition.
- • Exhibit A6 is an extract from the New Shorter Oxford English Dictionary.
- • Exhibit A7 is a document entitled ``Sales Tax Decisions'' being a consolidation of Circular Memoranda and other rulings relating to (inter alia) sales tax law.
- • Exhibit A8 is a further statement by Mr Jay dated 15 March 1999.
- • Exhibit A9 is a further statement by Mr Robinson dated 15 March 1999.
- • Exhibit A10 is a consolidated index of box files (as previously noted) which are referable to statements by Mr Jay dated 12 October 1998 and 15 March 1999.
- • Exhibit A11 is an advertising brochure entitled ``Is It Any Wonder a Maytag Lasts So Long?''.
- • Exhibit A12 is a brochure in respect of a 6kg capacity Maytag Washer Model LAT5006.
- • Exhibit A13 is a brochure in respect of a Kleenmaid Washing Machine and Dryer.
- • Exhibit A14 is a brochure in respect of a Greenwald Industries Vertical 7 Coin Shute.
- • Exhibit A15 is a fax by Richard Jay Laundry Equipment to Ms Brennan dated 2 November 1998.
- • Exhibit A16 is a document prepared by the Australian Bureau of Statistics and entitled ``Census of Population and Housing''.
- • Exhibit A17 is a further statement by Mr Peter Jay dated 28 April 1999.
- •
Exhibit A18
is an outline of the Applicant's Submissions (referred to as the ``Applicant's Outline'').
ATC 2374
- • Exhibit R1 is a list of objections by the Respondent; that exhibit indicates that objections in respect of paragraphs 51, 52, 53, 54 and 57 were deleted.
- • Exhibit R2 is an extract from the second reading speech of Sir Arthur Fadden in respect of the 1954-55 Budget.
- • Exhibit R3 is a statement by Mr Gregory Last, an officer in the employ of the Respondent, dated 10 March 1999.
- • Exhibit R4 is the first refund application in respect of the period April 1990 to March 1993.
- • Exhibit R5 is the second refund application.
- • Exhibit R6 is the Respondent's written submissions (referred to as the ``Respondent's Submissions'').
It may be noted in general terms in respect of the exhibits that, inter alia in accordance with Exhibit A1, Mr Jay had furnished certain information as to sales of disputed washing machines and dryers for a period of three months from July to September 1995; Exhibit A2 amplified that information so as to provide details of sales for the full year July 1995 to June 1996.
3. It is convenient at this stage to refer to a number of matters which might properly be categorised as being of a general or preliminary nature:
(a) The Applicant applied at the commencement of the hearing for an order that the matter be dealt with on a confidential basis; Mr McGovern agreed and the matter proceeded accordingly. Subsequently, Mr Higgins agreed that, excepting only for certain specified material, the confidentiality application was to be treated as withdrawn. A letter dated 12 August 1999 by Mr Taylor to the Tribunal sets out the extent to which the Applicant submitted that material before the Tribunal should remain confidential. Clauses 1 and 2 of that letter are as follows:
``1 Evidence of the identity, business addresses and particulars of dealings between
- (1) Richard Jay Distributors Pty Limited and particular customers; and
- (2) Richard Jay Laundry Equipment Pty Limited and particular customers
including particulars included in invoices raised by those companies.
2 Evidence of the identity, business addresses and particulars of dealings between Jay Laundry Rentals Pty Limited and particular customers including particulars of addresses where that company has installed laundry equipment under rental agreements.''
Clause 3 of that letter is not repeated in these Reasons because its content, is or may itself be, confidential.
This decision then is prepared and published on a non-confidential basis; however, and so as to preserve the confidentiality of certain material (as referred to in the letter by Mr Taylor dated 12 August 1999), I direct that all witness statements by Messrs Jay and Robinson, and also all of the box files referable to those witness statements must be and remain confidential. I appreciate in this context that the box files contain both confidential and non- confidential material, but so as to ensure that there is no difficulty as to which material constitutes material which must remain confidential, my direction relates to all of such statements and box files. These Reasons have been prepared in conformity with clause 3 (and being the clause which has not been repeated) of the letter dated 12 August 1999.
(b) It was agreed between the parties that the Tribunal need not be concerned with any question as to whether any relevant sales tax was refunded. The task of the Tribunal is confined purely to a consideration of the evidence so as to enable it to furnish an answer to the question of whether or not any of the disputed machines are entitled to the concessional rate of tax (referred to in brief as the ``concessional rate'').
(c) Counsel were agreed furthermore that although the first refund claim and the second refund claim fell to be decided under different statutes, the wording of the relevant Items is such that at least for the purposes of this decision, there is no difference.
4. (a) The first refund claim falls to be decided under the Sales Tax (Exemptions and Classifications) Act 1935 (referred to as the ``old classifications Act'' or ``the 1935 Act''). Items 1 and 2 of the Third Schedule to the 1935 Act read, so far as is relevant, as follows:
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``Item No.Specification of Goods
1 Goods... of a kind ordinarily used for household purposes, namely:
- ...
- (f) washing machines, wringers and other appliances used for or in connexion with laundering;
- ...
2 Parts, fittings and accessories for goods covered by item 1...''
(b) The second refund claim falls to be decided under the Sales Tax (Exemptions and Classifications) Act 1992 (referred to as the ``new classifications Act'' or ``the 1992 Act''). Items 1(1) and 1(2) of Schedule 2 of the 1992 Act read, so far as is relevant, as follows:
``Item 1
(1) The following goods of a kind ordinarily used for household purposes:
- ...
- (i) washing machines and other appliances of a kind ordinarily used in, or in connection with, laundering clothes;
- ...
(2) Goods marketed principally as parts, fittings or accessories for goods covered by subitem (1).''
5. (a) The matter was heard over a period of seven full hearing days and generated (when considered in conjunction with the exhibits and related annexures) a very large body of evidence. During the first two days (in December 1998) Mr Higgins took the Tribunal through the witness statements and some of the content of the boxes of annexures.
(b) Subsequently, oral evidence was given by Messrs Jay, Robinson and Lindsay on behalf of the Applicant and by Mr Last on behalf of the Respondent; that evidence was heard over a period of three days in March 1999. During that period, the Tribunal attended an inspection at the Park Regis Hotel in order to view its coin- operated washing machines.
(c)(1) At the end of the hearing in March 1999 the parties were directed to file written submissions. A day of argument in July 1999 proved insufficient and argument proceeded for a further full day on 12 August 1999. That day also proved insufficient to enable Mr Higgins to complete his submissions in reply. Accordingly, and at the end of that hearing, the Tribunal directed that Mr Higgins be allowed to furnish his remaining submissions in reply in writing within two weeks; at the same time the Tribunal also directed that Mr McGovern be allowed, if his client so desired, a similar period within which to furnish written submissions, in reply to the Applicant's written submissions, but to be confined to matters raised in the Applicant's written submissions properly categorised as new.
- (2) The Applicant filed its written submissions (referred to as the ``Applicant Reply'') on 14 September 1999, a date which was after the last day of the period originally allowed. The Applicants Reply was nevertheless accepted and considered and is referred to in these Reasons.
- (3) The Tribunal has not in fact received any further written submissions on behalf of the Respondent; the Tribunal does not think it necessary to refer to certain correspondence in this regard, suffice it to say that although it did seem that the Respondent did in fact intend to file additional submissions, and was in fact allowed until 4 October 1999 within which to do so, no such additional submissions were in fact received by that date or thereafter. The Tribunal does not doubt that there is good reason why this should be so. However, the Tribunal considers that it should finalise and publish its decision without ant further delay. The Tribunal notes however that the evidence before it is exhaustive, and doubts whether any further submissions would have assisted it. On the evidence, and as these Reasons demonstrate, the Applicant has in the view of the Tribunal a strong case on the facts in respect of the disputed machines (and leaving aside for the moment the 10kg machines). The Applicant's case in respect of the 10kg machines is not as strong, but the Applicant is, on balance, entitled to succeed. As to the law, and again as these Reasons demonstrate, the Tribunal does not consider that the ``essential character'' test referred to in the judgement of French J in
Diethelm Manufacturing Pty Ltd v FC of T 93 ATC 4703; (1993) 44 FCR 450; (1993) 26 ATR 465 (as to which see later provisions in these Reasons) and which was said by Hill J to ``lack precision'', is
ATC 2376
relevant in respect of this case. Put succinctly, the Tribunal, as these Reasons demonstrate, does not consider that any further submissions either as to law or fact, would have lead to any different result.
(d) The evidence which the Tribunal has been obliged to consider is, of course, that contained in the T Documents, the exhibits (and including the large box files annexed to certain exhibits) and, of course, the transcript. The evidence in December 1998 was transcribed on the basis that the second day followed the first and so that that transcript is numbered sequentially; by contrast, and in respect of each subsequent hearing day, the relevant transcript commences with page 1. References to transcripts are preceded by the relevant hearing date.
6. This matter, when it first commenced, concerned the question of whether or not the concessional rate provided in the statutory provisions in each of clauses 4(a) and 4(b) should be applied to certain imported Speed Queen, Maytag and Primus brand washing machines and dryers (collectively ``the machines'') and parts for the machines (``parts'') imported and distributed by the Applicant. The model numbers of the machines which were originally in dispute (the ``relevant machines'') are set out in columns (1) to (4) inclusive of an annexure to the Applicant's Statement of Facts, Issues and Contentions; that annexure (which is referred to in these Reasons as the ``Schedule'') is set out as follows:
"Maytag Washer Model Numbers:
+------------+--------------+--------------+----------+---------------+---------------+----------------+
| [1] | [2] | [3] | [4] | [5] | [6] | [7] |
| Coin-Slide | Coin-Dropper | Programmable | Push-Bar | Heavy Duty | Standard | Rated |
| | | Coin-Slide | | Control Panel | Control Panel | Dry Weight |
| | | | | | | Capacity (kgs) |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MAT10CS | | | MAT10PB | MAT11MN | LAT5004 | 6 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MAT23CM | | | MAT23PB | MAT24CA | LAT112 | 6 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MAT23CS | | | MAT23PB | MAT24CA | LAT112 | 6 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MAT25CM | | | MAT25PB | MAT26CA | LAT7300 | 6 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MAT25CS | | | MAT25PB | MAT26CA | LAT7300 | 6 |
+------------+--------------+--------------+----------+---------------+---------------+----------------+
Primus Washer Model Numbers:
+------------+--------------+--------------+----------+---------------+---------------+----------------+
| [1] | [2] | [3] | [4] | [5] | [6] | [7] |
| Coin-Slide | Coin-Dropper | Programmable | Push-Bar | Heavy Duty | Standard | Rated |
| | | Coin-Slide | | Control Panel | Control Panel | Dry Weight |
| | | | | | | Capacity (kgs) |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| | W7 | | W7 | | | 7 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| | W10 | | W10 | | | 10 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| | HS10 | | HS10 | | | 10 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| | GF10 | | GF10 | | | 10 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| | GF7 | | GF7 | | | 7 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| | R6 | R6 | R6 | | | 6 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| | R7 | R7 | R7 | | | 7 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| | R10 | R10 | R10 | | | 10 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| | F10 | | F10 | | | 10 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| | F7 | | F7 | | | 7 |
+------------+--------------+--------------+----------+---------------+---------------+----------------+
Speed Queen Washer Model Numbers:
+------------+--------------+--------------+----------+---------------+---------------+----------------+
| [1] | [2] | [3] | [4] | [5] | [6] | [7] |
| Coin-Slide | Coin-Dropper | Programmable | Push-Bar | Heavy Duty | Standard | Rated Dry |
| | | Coin-Slide | | Control Panel | Control Panel | Dry Weight |
| | | | | | | Capacity (kgs) |
| | | | | | | [see note] |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| EA1111 | | | EA1111 | | | 6 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| EG1120 | | | EG1120 | | | 7 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| EG5121 | | | EG5121 | | | 7 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| RG6190 | | | RG6190 | | | 2 x 7 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| SG4990 | | | SG4990 | | | 7 |
+------------+--------------+--------------+----------+---------------+---------------+----------------+
Note:
Dry weight capacities shown as 2 x 7 indicate the capacity of twin stack dryer models.
Each such model has two drums each with a capacity of 7 kilograms.
Maytag Dryer Model Numbers:
+------------+--------------+--------------+----------+---------------+---------------+----------------+
| [1] | [2] | [3] | [4] | [5] | [6] | [7] |
| Coin-Slide | Coin-Dropper | Programmable | Push-Bar | Heavy Duty | Standard | Rated Dry |
| | | Coin-Slide | | Control Panel | Control Panel | Dry Weight |
| | | | | | | Capacity (kgs) |
| | | | | | | [see note] |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MDE11CS | | | MDE11PB | MDE11MN | | 2 x 7 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MDE27CS | | | MDE27PB | MDE27MN | | 2 x 7 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MDE22CS | | | MDE22PB | | | 2 x 7 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MDE10CS | | | MDE10PB | MDE10MN | LDE7304 | 7 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MDE26CS | | | MDE26PB | | LDE7600 | 7 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MDE24CS | | | MDE24PB | MDE24MN | LDE212 | 7 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MDG11CS | | | MDG11PB | MDG11MN | | 2 x 7 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MDG27CS | | | MDG27PB | MDG27MN | | 2 x 7 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MDG22CS | | | MDG22PB | | | 2 x 7 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MDG10CS | | | MDG10PB | MDG10MN | LDG7304 | 7 |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MDG26CM | | | MDG26PB | MDG26CA | LDG7600 | 7 |
| MDG26CS | | | | | | |
|------------|--------------|--------------|----------|---------------|---------------|----------------|
| MDG24C | | | MDG24PB | MDG24CA | LDG212 | 7 |
+------------+--------------+--------------+----------+---------------+---------------+----------------+
Note:
Dry weight capacities shown as 2 x 7 indicate the capacity of twin stack dryer models.
Each such model has two drums each with a capacity of 7 kilograms."
ATC 2378
7. (a) As set out in clause 6, the relevant machines are categorised as Maytag, Primus and Speed Queen. In fact, the Applicant's rights of distribution in respect of the Speed Queen brand ceased in 1990, although the Applicant was allowed a period after termination within which to dispose of its Speed Queen stock. Speed Queen is now distributed by the companies referable to Mr Lindsay and which were referred to earlier in these Reasons. Mr Lindsay's companies compete with the companies controlled by Mr Jay and including the Applicant.
(b) It is relevant at this stage to note that the Applicant imports the relevant machines and then, as a wholesaler, on-sells them to a related corporation which then sells them by retail or rents them. I have previously in these Reasons, and in describing the exhibits, referred to two related corporations of the Applicant; there have been a number of name changes in respect of the retail related corporations of the Applicant, but it is unnecessary for me to go into detail as to those name changes; suffice it to say that the Applicant is a wholesaler who imports the relevant machines and sells them, as a wholesaler, to one of its associated related corporations which then retails or rents those machines; the renter and the retailer respectively would usually be different related corporations.
(c) The Tribunal was told at the commencement of the hearing that it would be required to decide only whether the concessional rate allowed in accordance with the statutory provisions set out in clause 4 applies in respect of:
- (1) Those machines which are listed in columns (1), (2) and (3) of the Schedule, all of which are coin-operated machines; and
- (2) Those machines in the Schedule which have a dry weight linen capacity of 10kgs; this latter category applies only to the Primus washers whose Model Nos. are W10, HS10, GF10, R10 and F10; these machines are sometimes referred to, simply (and in the interests of brevity) as the ``10kg machines''.
This is so having regard to the fact that the Respondent conceded that all relevant machines having a dry linen weight capacity of less than 10kgs, and which do not have a coin mechanism are entitled to the concessional rate. Put in other words, the Respondent contends that a machine whose operation commences with a coin mechanism (of whatever type) is inherently commercial and to be distinguished in respect of its genus or class from domestic machines, whose operation commences with a switch, a slide or some other mechanism which does not involve a coin; both of these classes are furthermore to be distinguished from industrial machines (of large dry linen weight capacity) used by factories, hotels and other large establishments for the purpose of their own laundering requirements.
(d) It is perhaps useful at this juncture to include definitions of some frequently used terms:
- (1) Leaving aside for the moment the question of how the term ``household'' (in its noun form or in its adjectival form) should be construed, annexure PJ11 to Exhibit A1 is an advertisement by Joyce Mayne (in two pages) featuring a range of machines with dry linen weight capacities of up to 7.5kgs and which do not feature coin operations of any kind, and which are commonly or usually sold by retail to customers for use in nuclear family households; a ``nuclear household'' is one in which a couple and their children (and there were references during the hearing to the typical family referred to in statistics as a husband, a wife and 2.8 children) reside and have available to them a machine of their own, and which is not shared; these machines are such that cost sharing is not relevant, and they are referred to for the purposes of these Reasons as the ``domestic machines''.
- (2) The term ``commercial machines'' when used in these Reasons relates to the machines set out in columns (1), (2) and (3) of the Schedule and being the machines which are coin operated; the commercial machines require a coin operation because they are commonly sold for use in shared laundry facilities. Clause 32 of Exhibit A1 (and there is a corresponding clause in the first statement by Mr Lindsay which is Exhibit A4) sets out the various types of shared laundry facility premises as follows:
- ``...
- (1) public housing including flats, home units and town houses;
ATC 2379
- (2) flats, company and strata title home units, town houses, and other privately owned medium density housing;
- (3) aboriginal and other community housing;
- (4) housing provided by public benevolent institutions;
- (5) supervised care retirement units and hostels including housing provided by public benevolent institutions;
- (6) nursing homes;
- (7) residential colleges of universities, schools and other educational institutions;
- (8) seminaries;
- (9) defence forces barracks;
- (10) gaols and other corrective institutions adopting self care regimes;
- (11) employee quarters including those for hospital, agricultural, forestry, mining and construction employees;
- (12) caravan parks;
- (13) private hotels;
- (14) hostels;
- (15) lodges and self care resorts;
- (16) guesthouses;
- (17) motels;
- (18) public hotels; and
other residential premises or in other premises used in connection with such residential premises.''
The premises set out in this clause are referred to collectively as the ``shared premises'' or as the ``shared accommodation''; it is in respect of some (but not all) of the shared premises that cost sharing in respect of the machines will be a relevant consideration, and so as to preserve equity between the various users. This applies typically in blocks of units which have shared laundry facilities (and there are, according to evidence before the Tribunal, increasingly blocks of units which fall into this category), caravan parks, hotels, motels and residential housing of various types. By contrast, there are shared premises (and army barracks and gaols are examples) whose inhabitants also require the use of machines on a shared basis but are not required to pay for their use.
(e) There is another class of premises in which machines with coin operated activating mechanisms are commonly required; that category is the laundromat, sometimes referred to as a laundrette or laundry, all of which terms are (so the Tribunal was informed) largely synonymous.
(f) Cost sharing is achieved in accordance with various methods; the most usual is a coin- operated activating mechanism (referred to in brief as a ``coin mechanism'' and in respect of which a coin is required to start the machine); coin mechanism machines fall into different categories (as indicated by columns (1) to (3) of the Schedule). Machines can be programmed to take coins of different denominations; in some cases the programme might operate to yield a profit (for example, in the case of a caravan park or laundromat owner); others again might be programmed so as to yield no profit and this may occur in a block of units; yet again, in some blocks of units, the body corporate will exact no charge because it will have exacted a charge through its levy; in these latter circumstances padlocked electrical connections (one for each unit) will often ensure that each unit bears the cost of the electricity utilised by it.
(g) The term ``industrial machines'' refers to those heavy duty machines which are commonly used by factories, hotels and other large institutions to launder their own laundry; the parties are in dispute as to where the relevant dividing line should be drawn; the Respondent contends that a machine having a dry linen weight capacity of 8 kilograms or above is an industrial machine (and thus not a commercial machine), whereas the Applicant contends that the line should be drawn at a heavier, although unspecified, capacity.
(h) The term ``disputed machines'' refers collectively to all of the commercial machines set out in columns (1) to (3) of the schedule, and also those machines which do not have a coin mechanism but which have a dry linen weight capacity of 10 kilograms (referred to separately as ``10kg machines''), and which are set out in column (4) of the Schedule.
(i) Routers and renters are a particular feature of this industry. A renter purchases a machine and rents it to a user (which will usually be a laundrette, but might also be one of the classes of premises referred to in clause 32 of Exhibit A1) in exchange for a fixed rent which is calculated by reference to the cost of the machine and its anticipated life. A renter is not
ATC 2380
entitled to a share of the coins deposited in the machine. A router, by contrast, obtains a licence to place a machine in (typically) shared premises; the router is obliged to service the machine, and it is the router who is entitled to all or a share of the coins which are deposited in it.(j) The Schedule refers to the machines by reference to their model numbers. Over the years, model numbers have altered or models have been superseded by later models.
8. Annexure PJ9 (to Exhibit A1) contains a picture of a Maytag machine entitled ``The Top-Load Leader''. It features a coin slide which is set above a money drawer. The whole apparatus is contained in a security housing of steel and has two security locks, thus making it difficult to penetrate. The evidence before the Tribunal was that the coin slide mechanism can very easily and at low cost, be replaced by a push bar mechanism and in which event, the ``money box'' portion is retained, albeit that it then becomes redundant. Similarly, it is not difficult or expensive to transform a coin dropper machine into a push-switch or button controlled machine. The Applicant contends that the distinction between a coin mechanism machine and a non-coin mechanism machine is not such that they should be categorised in separate classes.
9. Before leaving the general provisions, it is useful to deal in brief terms with laundromats. They may be unattended, attended in part, or at all times by employees of the owner. Most typically, a user will come into the laundromat to do his or her own washing and will do so by depositing coins in the machine for this purpose. Attendants may be on hand to supervise or, in case of need, to assist. At the other end of the spectrum are those laundries which actually do the washing for the customer. However they fall outside the context of this hearing.
10. I must confess that I am, at least to an extent, responsible for the fact that the evidence before the Tribunal was so lengthy and at times, so complex. I had thought, on originally reviewing the T Documents and before the hearings commenced, that it would be necessary for me to comprehend the technical and mechanical components of each disputed machine. It is for this specific reason that I asked numerous questions which were invariably answered with commendable patience. In the result, and with the benefit of hindsight, I do not think that so detailed an enquiry was necessary. This matter is, in my view, and as will be outlined later in these Reasons, far less complex than the weight of evidence might lead one to imagine.
11. The exhibits and boxes of annexures tendered were voluminous. The Applicant and its advisors were determined (understandably enough) to ensure that full evidence as to usage was presented and presumably, so as to avoid the fate of the taxpayer in Diethelm (referred to more fully later in these Reasons) and where the evidence was perhaps in certain respects thought to be insufficient. Some of the box files contain large numbers of invoices over different and selected periods. Originally the periods concerned consisted of three months in 1990, the first three months in the year commencing 1 July 1995, and the whole of the subsequent year commencing 1 July 1996; however and subsequently the evidence for the second period was, as set out previously, expanded to cover a period of 12 months. The Applicant and its advisers prepared detailed summaries setting out in respect of each of such periods and in relation to each model, the various types of premises in which disputed machines were installed. (The Tribunal refers in this context in particular to pages 35 and 40 to 42 of Exhibit A1 and page 3 of Exhibit A2). Those detailed summaries were then condensed and the condensed summaries appear in clause 191 (page 62 and following) of the Applicant's Outline which is set out in these Reasons as follows:
I use the term ``distribution schedule'' to refer to the condensed summaries contained in clause 191 of the Applicant's Outline. I do not think it necessary for me to set out the more detailed summaries which distinguished between different categories of shared premises, since I am satisfied that the Schedule is accurate. (See also in this context the extract from the evidence set out in clause 14(y) and also the references in clause 11 to Exhibits A1 and A2).
The Tribunal notes that it considers that the three periods selected constitute adequate samples and that the distribution schedule
ATC 2383
adequately summarises the relevant evidence. It is to be noted that a major or at least substantial percentage of each model was installed in shared premises.12. The assistance given to me by both barristers throughout these hearings deserves my profound gratitude; this applies in particular to their comprehensive written submissions (and including the Applicant's Reply), on which I have found it helpful and useful to draw to some considerable extent for the purposes of these Reasons.
13. I note at this juncture that I accept that the oral evidence before me was truthful. Mr Last, who was called by the Respondent, gave evidence which, albeit truthful, was limited by the nature of his brief; he had been instructed to investigate a number of retail outlets in which domestic machines are customarily sold. The other three witnesses are all involved in the distribution of commercial machines; all three of them have had extensive experience in this area.
Part B - Selected extracts from the transcripts
14. Having carefully considered the evidence before me and for reasons set out hereunder, I do not think that a detailed and comprehensive examination of it is altogether necessary for the purposes of these Reasons. However, and if only for the sake of completeness, and in the event that this matter is taken further, I propose to set out some aspects of the evidence which can usefully be, or perhaps deserve to be, highlighted; the extracts from the transcripts which are gathered as a matter of convenience in this clause 14 were selected because of their particular relevance (in my view) to issues before the Tribunal. Some of the extracts are largely self-explanatory; others again are supplemented by the Tribunal's comments. As will appear from a consideration of these Reasons as a whole, I have decided that it is desirable for me to include in these Reasons not only the extracts from the transcripts selected by me, but also and separately the respective submissions of the parties as to the facts. An attempt (at length) by me to draw together in discrete parts relevant aspects from each of these three broad categories, failed (in my view) because of the overlapping which was thereby entailed. It seemed to me on reflection that it was desirable for me to include all three categories, and even though including them separately may be thought to be in certain respects cumbersome, the alternative was even more so. A close examination (and comparison) of the respective submissions of the parties on the facts reveals that although there are differences (in particular as to emphasis and interpretation of evidence) between them there is also a considerable degree of accord.
[extracts from transcript omitted]
15. The Respondent conceded that excepting only for machines having a capacity of 10kg, the machines set out in column (4) of the Schedule were entitled to the concessional rate. There was evidence before me that in respect of each line of the Schedule the machines were very similar indeed, and that the distinguishing feature in respect of those machines in column (4) which are of less than 10kg in capacity is simply that they do not have a coin mechanism. Prima facie then the distinguishing feature so far as the Respondent is concerned is (leaving aside for a moment the 10kg machines) the presence or absence of a coin mechanism. The Respondent has contended that the fact that it conceded that the column (4) machines were entitled to the concessional rate (if under 10kg in capacity) should not be so narrowly construed. The Respondent contends that this is but one of the distinctive differences between coin-operated and non coin-operated machines, and its concession was no more than just that, a concession. As set out previously the Respondent's contentions as to the cut-off point was originally that it should be set at 10kg but later 8kg was the measure selected.
Part C - Preliminary comment in respect of the law and law as set out in Applicant's Outline
16. As foreshadowed at the hearing on 12 August 1999, I intended to reproduce the summary of the law which appears in the Applicant's Outline. I do so simply because it is comprehensive and because it furnishes detailed references to numerous decided cases and also certain other relevant material. I should emphasise that I do so as a matter of convenience and because, as a summary, it furnishes a good starting point. Mr McGovern said (at page 2 of the 12 August 1999 transcript): ``I think so far as the legal submissions are concerned, there may be one point at which we are at issue...''. He then went on to develop a detailed argument as to the ``essential character'' test referred to by French J in Diethelm's case (referred to later in these
ATC 2384
Reasons); the Respondent contends that the ``essential character'' test remains relevant. In clauses 17 to 104 (inclusive) I reproduce clauses 40 to 127 (inclusive) of the Applicant's Outline; comment by me on the law will be set out later in these Reasons.Construction of items generally
17. The expression ``goods of a kind ordinarily used for household purposes'' is not defined for the purposes of the old or the new classification act. Nor does any other definition in the sales tax legislation inform its meaning in any relevant way.
18. The expression has no technical legal signification. There is no indication in the legislation that parliament intended any other meaning than that which those words ordinarily have in this country and at this time. Nor do they have any special trade meaning: see generally
Dick Smith Electronics Pty Limited v FC of T 97 ATC 5089; (1997) 37 ATR 346;
Zeroz Pty Ltd v FC of T 97 ATC 4277; (1997) 35 ATR 349.
19. The common understanding of the words is therefore to be determined in the sense that it has in ordinary English usage in Australia. That is a question of fact: see generally
Magna Stic Magnetic Signs Pty Ltd & Anor v FC of T 91 ATC 4216; (1991) 21 ATR 1367 per Beaumont and McLoughlin JJ at ATC 4223; ATR 1375-24. It is for the Court or Tribunal itself to determine by considering the words in their context with the assistance of dictionaries and not by expert evidence: see
Australian Gaslight Co Limited v Valuer-General (1940) 40 SR (NSW) 126 esp. per Jordan CJ at 137;
Rotary Offset Press Pty Ltd v DFC of T 72 ATC 4212; (1972) 3 ATR 319 esp. per Stephen J at ATC 4213; ATR 320-23.
20. In construing statutory language there is a presumption that it should be given the most natural and ordinary meaning which is appropriate in the circumstances: Dick Smith Electronics Pty Limited (supra) esp. per Tamberlin J at ATC 5096; ATR 355-20; also Zeroz Pty Ltd (supra);
Collector of Customs v Agfa-Gevaert Limited 96 ATC 5240; (1995-1996) 186 CLR 389 per the whole court at ATC 5245; CLR 398; 35 ATR 249 at 255;
Maunsell v Olins [1975] AC 373 per Lord Simon of Glaisdale at 391.
21. The preamble to Item 1 is a compound expression the meaning of which must be determined in its context. Its meaning is not determined by construing it according to the separate meaning of each particular word. In
Lorimer v Smail (1911) 12 CLR 504, Barton J (at 510) quoted with approval the words of Lord Halsbury in
Mersey Docks and Harbour Board v Henderson Bros. (1888) 13 App Cas 595 at 599-600:
``It is certainly not a satisfactory mode for arriving at the meaning of a compound phrase to sever it into its several parts and to construe it by the separate meaning of each such part when severed.''
22. Stamp J in
Borne v Norwich Crematorium Limited [1967] 1 WLR 691 at 696 said:
``Sentences are not mere collections of words to be taken out of the sentence, defined separately by reference to the dictionary or decided cases, and then put back again into the sentence with the meaning which one has assigned to them as separate words so as to give the sentence or phrase a meaning which as a sentence or phrase it cannot bear without distortion of the English language.''
23. Thus, in
Telstra Corporation Ltd v FC of T 96 ATC 4805; (1996) 33 ATR 290, a case concerning the classification for sales tax purposes of certain electrical fittings, Lindgren J said (at ATC 4817; ATR 304-50):
``It is necessary to refer only to the expressions `electrical engineer' and `electrical system' to make the point that the kind of relation between electricity and the noun to which the adjective `electrical' is applied varies according to context.''
24. Accordingly, authorities on the meaning of the noun ``household'' taken alone are likely to be unhelpful to the proper construction of the compound expression under consideration here which incorporates the adjective ``household'' to qualify relevant ``purposes'' in the adjectival phrase ``household purposes''. The Respondent's authorities:
Hopper Nominees Limited v Rodney District Council (1996) 1 NZLR 239;
Simmons v Pizzey [1977] 2 All ER 432; [1977] 3 WLR 1;
Davis v Johnson [1979] AC 296; [1978] 1 All ER 841 are in each case distinguished for that, among other reasons - as to which see further below.
ATC 2385
Construction of exemption and concession items
25. If the proper construction of the preamble to Item 1 were seriously in doubt, and it is submitted that it is not, then as the expression is part of a provision establishing a concession or exemption from a taxing statute, it is submitted that well settled authority requires a robust and not a narrow or pedantic approach should be adopted.
26. In
Burt v FC of T (1912) 15 CLR 469 Barton J said (at 482.2):
``... Where the construction of such exceptions is seriously in doubt, the interpretation should favour those whose claims are based upon the exceptions. For that proposition there is the highest authority, if authority be necessary. In
Armitage v Wilkinson (1878) 3 App Cas 355 at 369 the Judicial Committee expressed their dissent from the principle that in a taxing act provisions establishing an exception to the general rule are to be construed strictly against those who invoke their benefit. They point out that such a principle `is opposed to the rule expressed by Lord Ellenborough in Warrington v Furbor (8 East, 242) and followed and confirmed in Hobson v Neale (17 Beav. 178). Lord Ellenborough's words are (8 East 242 at 245):- ``I think that when the subject is to be charged with a duty the cases in which it is to be attached ought to be fairly marked out; and we should give a liberal construction to words of exception, confining the operation of the duty.'' It is only, however, in the event of their being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or liberality of construction need arise.'''
27. In
Universal Press Pty Limited v FC of T 89 ATC 5234; (1988) 20 ATR 1758, a case concerning sales tax liability, Gummow J applied the reasons for decision in Burt. His Honour said (at ATC 5238; ATR 1762-37):
``... Earlier, in
Burt v. FC of T (1912) 15 CLR 469 at pp 482 and 487 respectively, Barton J and Higgins J had expressed agreement with Privy Council authority to the effect that there was no principle of construction that in a taxing Act provisions establishing an exception to the general rule of taxation are to be construed strictly against those who invoke their benefit; see Pearce and Geddes, Statutory Interpretation in Australia, 3rd ed., §9.32.''
28. In
Collector of Customs v Cliffs Robe River Iron Associates (1985) 7 FCR 271, the Full Court of the Federal Court considered the scope of the excise exemption available for diesel fuel used in connection with mining operations. Bowen CJ, Morling and Neaves JJ said (at 275-0):
``The relevant provisions of the Excise Act reflect the legislative policy of encouragement of mining operations and should not be given a narrow application.''
29. The above authorities were applied by the Full Court in Diethelm's case where French J said (at ATC 4708-4709; ATR 470-38; FCR 457):
``On the other hand an exemption which exists for the purpose of encouraging, rewarding or protecting some class of activity is not to be given a narrow application... Underlying the exemptions [ sic] created in Item 1 of the Third Schedule was the recognition made explicit in the Second Reading Speech in 1954 of `a wide demand for exemption of furniture and household goods' and the purpose of `appreciably [reducing] the costs of home establishment'. Within the framework of that stated policy, the classes of goods set out in Item 1 of the Third Schedule are to be widely construed.''
[The full text of the Second Reading Speech introducing to the preamble to the old Item 1 is at Exhibit R2. The Explanatory Memorandum introducing the preamble to the new Item 1 provides at Chapter 8:
``Schedule 2 will cover goods presently covered by the Third Schedule to the Sales Tax (Exemptions & Classifications) Act 1935''
]
30. In
FC of T v Chubb Australia Pty Ltd 95 ATC 4186; (1995) 30 ATR 285; (1995) 56 FCR 557, the Full Court adopted the same approach to the construction of the preamble to Item 1. Burchett J said (at ATC 4187; ATR 286-16; FCR 559):
``... The classification is not a template from which all reality came, but at best a partially successful attempt to include all reality in a series of descriptions of a more of less systematic kind. It follows, in my opinion,
ATC 2386
that a Court should not exacerbate the problem by giving to the items in a statute setting out exemptions and classifications any narrow or rigid meaning. They must be understood in a flexible and elastic sense capable of accommodating the individual variations, unforeseen by the draftsman, which reality is certain to produce.''
31. Consistent with earlier authority the principle was also noted by the Court in construing other sales tax concession and exemption Items. Thus in
Kentucky Fried Chicken Pty Limited v FC of T & Ors 86 ATC 4701; (1986) 17 ATR 1039 (SC NSW) where Yeldham J said (at ATC 4710; ATR 1048-39):
``... Adopting a robust approach to the construction of the items in question, I consider that in this day and age paper serviettes can properly be described as `table napkins' which, by definition, come within the description `household drapery and soft furnishings'.''
32. Similarly, in
GKN Australia Ltd v FC of T 94 ATC 4417; (1994) 28 ATR 321 where the Court considered the proper construction of sales tax exemption Items applicable to the building industry. Foster J said (at ATC 4419; ATR 323-25):
``... It may be said, however, that the overall policy of Division XII is one of encouragement and assistance to the building industry through the provision of exemptions from sales tax in what are, at relevant times, considered to be appropriate areas.
The nature of the legislation has led the Courts to adopt an approach to construction of the wording of the individual items which may be described as less strict than that normally applied in statutory interpretation. This matter was considered in detail by French J in his judgment in Diethelm Manufacturing Pty Limited v FC of T 93 ATC 4703 at 4708; (1993) 26 ATR 465....''
Dictionary meanings
33. The New Shorter Oxford English Dictionary and the Macquarie Dictionary provide the following relevant meanings:
- `` ordinarily adv. 1. In accordance with a rule or established custom; according to regular practise or occurrence. 2. In the ordinary course of events; in most cases; usually, commonly. 3. To an ordinary degree; to the usual extent. 4. In an ordinary or unexceptional way; as is normal or usual.'' (Oxford)
- `` ordinarily adv. 1. in ordinary cases; usually....'' (Macquarie)
- `` household n. 1. collect. The people living in a house, esp. a family in a house; a domestic establishment... adj. 1. Of or pertaining to a household; domestic. 2. ...'' (Oxford)
- `` household n. 1. the people of a house collectively; a family, including servants, etc; a domestic establishment. - adj. 2. of or pertaining to a household; domestic: household furniture. 3. used for maintaining and keeping a house. 4. ...'' (Macquarie)
- `` house n. 1. A building for human habitation, a dwelling, a home...; a part of a building occupied by one tenant or family... 2. A building accommodating or frequented by people that is other than an ordinary private dwelling;... A building occupied by a religious community; a monastery, a convent;... A university college.... A building where public refreshment is provided; an inn, a tavern, a public house... A boarding-house of a public school;... 5. A place of abode or rest...'' (Oxford)
- `` house n. 1. a building for human habitation. 2. a place of lodgement, rest etc,... 7. an inn; a public house... 15. a residential hall for students as in some universities... 17. a boarding house attached to and forming part of a school....'' (Macquarie)
- `` domestic adj. 1. Of or pertaining to the home, house, or household; pertaining to one's home or family affairs....'' (Oxford)
- `` domestic adj. 1. of or pertaining to the home, the household, or household affairs. 2. devoted to home life or affairs...'' (Macquarie)
Authorities: ``Goods of a kind ordinarily used for household, purposes''
Direct authority: Full Court of the Federal Court of Australia
34. The principal authority on the proper construction of the preamble to Item 1 is the decision of the Full Court of the Federal Court of Australia in Diethelm's case as applied by the Full Court in Chubb.
ATC 2387
35. In Diethelm the Court considered whether office chairs sold by the Applicant were goods of a kind ordinarily used for household purposes within the meaning of the preamble to Item 1. There was no dispute that they were ``furniture'' within the meaning of paragraph 1(a) of the Item. Hill J (with whom Whitlam J agreed) said (at ATC 4718-4719; ATR 482-29; FCR 470):
``In each case, however, the precise language of the item must be borne in mind....
Once it is appreciated that the question for issue is concerned with the kind of goods in question rather that the actual goods, it is clear that evidence such as was given in the case as to the market into which the actual goods are sold will be of little relevance. The fact that a high proportion of the chairs in question were bought for office use would tell little as to the use of the kind of goods, the genus, of which the particular goods in question form a part. Similarly, it seems to me that a finding that the goods are of high quality making them too expensive for general sale for use in households will be of little or no significance. This will be particularly so if the class of goods in question is capable of encompassing goods of high quality as well as goods of lesser quality.
The use of the words `goods of a kind' entails the determination of relevant genus. Therein lies an initial difficulty. The wider the genus is stated, the more likely it will be that it will be found that that class of goods is commonly used for a particular household function. That point was illustrated by the decision of Gummow J in Hygienic Lily Pty Ltd v DFC of T 87 ATC 4327; (1987) 18 ATR 619. That case concerned the question of whether three sizes of wax coated paper cups bearing designs including the trademark `McDonalds', fell within the same Item. His Honour held that the goods did, being of the genus `cups', that class of goods being of a kind ordinarily used for household purposes. Those purposes being, in his Honour's view (at ATC 4330; FCR 400):
`the carrying of beverages and the consumption thereof.'
...
In the course of his Honour's judgment Gummow J said (at ATC 4330; FCR 399):
`... the setting in which the phrase ``goods of a kind'' appears suggests it is directed not to the use for which the particular goods in question were designed or manufactured, nor to the purpose to which it is intended those particular goods shall be put, but rather to the nature, quality and adaptation of the goods in the class or genus in question. Thus, goods are ``of a kind ordinarily used for household purposes'' if they are to be recognised as members of a class or genus which commonly or regularly (albeit not necessarily exclusively or principally) is used for household purposes: cf
Customs and Excise Commrs v Mechanical Services (Trailer Engineers) Ltd (1979) 1 WLR 305 at pp 312-313, 315, 316-317.'''
36. Hill J went on to say (at ATC 4720; ATR 484-5; FCR 472):
``... I think the proper approach is to ask, in respect of the goods in question, whether they are of a kind ordinarily used for household purposes. This approach requires consideration of each of the particular chairs in question.... The onus lies upon the appellant to show, in respect of each of the items of goods, that they are of a kind ordinarily used for household purposes. I should say that chairs sold by Ikea or Freedom Furniture and some of the chairs sold by Diethelm are clearly of the same kind, notwithstanding that they may be differently constructed, that one may be constructed in Australia and one overseas, or that one may be upholstered in a better fabric than the other, or have better spring work than the other. The same sales tax consequences must apply where the goods are the same class of goods, notwithstanding that the destination of each of the actual goods under consideration may be to a different market.''
37. In Chubb the Full Court of the Federal Court considered the Commissioner's appeal from the decision of Beazley J in
Chubb Australia Ltd v FC of T 94 ATC 4626; (1994) 29 ATR 25. The Full Court considered whether evidence adduced at the trial that certain free standing safes were of a kind used by households to contain and keep safe household
ATC 2388
valuables, money and documents could permit the conclusion that they were ``goods of a kind ordinarily used for household purposes''.38. At the trial there was evidence that a number of the models of safe in dispute were used to a significant degree by households to contain and secure valuables. Following the Full Court in Diethelm, Beazley J said (at ATC 4634; ATR 34-49):
``The first question is to determine the genus of the goods. The initial step in that assessment is to determine whether safes are a single genus or whether there is more than one genus of goods to which different models of safe belong. There was no dispute that the purpose of all safes was to secure goods. The evidence disclosed that safes are capable of securing goods of different types, shapes and sizes, depending upon size and, to some extent, upon the design of the safe.''
39. Her Honour went on to say (at ATC 4634; ATR 35-7):
``... It seems to me that where, a range of goods of differing designs and sizes might normally be described by a common name, such as safes, it cannot be said that such goods constitute a single genus. Rather, it must be determined, in respect of the various models, whether they are goods of a kind ordinarily used for household purposes.''
40. Her Honour concluded (at ATC 4634-4635; ATR 35-35):
``In my opinion, it is a common or usual household purpose to secure valuables, such as jewellery, coins, stamp collections, guns, private papers and cash, within the home. Not only was there evidence that safes were used in the home for that household purpose, the proper inference to be drawn from the evidence... is that they were usual or common purposes for which the safes were used. It is clear, both on the evidence and as a matter of common sense, that all of the applicant's safes for which exemption is sought under Item 1(a) are not goods of a kind ordinarily used for such purposes. The applicant's two largest safes and the dispensary cabinet are obvious examples. The question to be determined therefore is which of the applicant's safes are goods `of a kind ordinarily used for household purposes'. In my opinion to the extent that safes may be classified as a cabinet or unit for securing valuables such as jewellery, coins, stamp collections, private papers and cash (save for large sums as might ordinarily be expected to be found in a bank or kept by a business or other institution) they may properly be described as goods `of a kind ordinarily used for household purposes'. To the extent that safes are not ordinarily so used, I am of the opinion that they do not fall within the exemption.''
41. Some of the models of safe were mostly sold to motels and hospitals. In holding that they were covered by the Item, Beazley J said (at ATC 4635; ATR 36-5):
``... I have come to this opinion... as they belong to that class or type of good which normally has a household purpose, namely the securing of valuables ordinarily found in a household. As the authorities clearly show, the actual use to which the particular goods are put is not relevant, rather it is their `nature, quality and adaptation which is relevant to their classification': Hygienic Lily per Gummow J at ATC 4717; FCR 399.''
42. On appeal, the Full Court said the question of whether particular goods were of a kind ordinarily used for household purposes was ``... a question of fact into which degree and impression must enter largely...'' (per Burchett J at ATC 4187; ATR 286-48; FCR 559); that ``... the determination will be made in a commonsense way...'' (per Hill J at ATC 4195; ATR 295-39; FCR 569); that it ``... involved a question of judgement based upon a consideration of the description and in some cases photos or drawings of the relevant safe.'' (per Hill J at ATC 4197; ATR 297-37; FCR 572) and ``... must necessarily be based to a large extent on experience and common sense...'' (per Tamberlin J at ATC 4199-4200; ATR 300-43; FCR 575).
43. The Full Court in Chubb rejected a construction based upon an enquiry as to the ``essential character'' of the goods which had been adopted by French J but not the majority in Diethelm. Rather it distinguished the composite nature of the Item from other forms of exemption and concession Items in the sales tax legislation and approved Beazley J's approach to the construction of the preamble to Item 1. Thus Burchett J said (at ATC 4187; ATR 286-44; FCR 559):
ATC 2389
``... But, with respect, I think the composite nature of the item must be observed. It refers to furniture, and in that respect the essential character of something said to be furniture will often be determinative. However, the item does not apply to a piece of furniture unless it also meets the description `goods... of a kind ordinarily used for household purposes'. That is a question of fact into which degree and impression must enter largely, but I do not think its resolution is assisted much by turning back to the essential character of the article. Rather, attention must be focussed on the statutory question of whether goods of that kind are ordinarily used for household purposes.''
44. Similarly Hill J (with whom Tamberlin J agreed) applied the reasons of the majority in Diethelm and in reviewing the reasons for decision in that case said (at ATC 4194-4195; ATR 295-5; FCR 569):
``In delivering a judgment with which Whitlam J agreed, I pointed out that the question to be determined was not whether the particular goods before the Court were ordinarily used for domestic purposes, but rather whether the goods themselves were of a particular kind ordinarily used for household purposes. I emphasised the need to bear in mind the language of the Item.
... I stated the approach to be adopted in the following passage (at ATC 4720; FCR 472).
`... I think the proper approach is to ask, in respect of the goods in question whether they are of a kind ordinarily used for household purposes. This approach requires consideration of each of the particular chairs in question.'''
45. His Honour also said (at ATC 4195; ATR 295-36; FCR 569):
``Where a question arises under Item 1(a) two issues will arise. The first, which is one of classification, requires the determination of the kind of goods to which the particular goods belong. This is sometimes spoken of as defining the genus to which the goods belong. The determination will be made in a commonsense way. In many cases mere observation of the item will enable the classification to be made. In some borderline cases the task of classification may involve a consideration of evidence.
The second issue involves giving an answer to the question whether the classification arrived at satisfies the language of the Item, that is to say, whether the relevant kind of goods is ordinarily used for household purposes. Again, in many cases, common experience will answer that question. In borderline cases, at least, it will be necessary to consider evidence to reach a conclusion.''
46. Other observations of the Court in Chubb also inform the present case. Burchett J said (at ATC 4187-4188; ATR 287-0; FCR 559):
``The question is not whether households ordinarily have such articles. That would be far too narrow a view...
Also, `ordinarily', used idiomatically in the sense of `commonly', is not equivalent to `exclusively', nor I think (and the Commissioner's argument accepted this) to `predominantly'.''
47. His Honour gave the example of an axe which may have several ordinary uses and said (at ATC 4188; ATR 287-17; FCR 560):
``... There is no suggestion, when the word `ordinary' is applied to each of these uses, that the particular use is the most common use, only that it is a common use.''
And (at ATC 4188; ATR 287-23; FCR 560):
``The statute does not employ the expression `used in a household', but `used for household purposes'.''
48. Similarly, Hill J (with whom Tamberlin J agreed) said (at ATC 4195; ATR 295-47; FCR 570):
``The word `ordinarily', in the collocation `ordinarily used' probably means no more than `commonly'. This was the meaning given to it by Davies J in OR Cormack Pty Limited v FC of T 92 ATC 4121; (1992) 23 ATR 151.''
49. His Honour also said (at ATC 4195-4196; ATR 296-14; FCR 570):
``... it may be noted that the Item does not require consideration of whether the relevant kind of goods is ordinarily used in households. The Item requires consideration of `household purposes'. It draws attention to the purposes for which the kind of goods are used, not the location of that use.''
And (at ATC 4196-4197; ATR 297-23; FCR 571):
ATC 2390
``... At issue is not whether the particular safes sold by the taxpayer were for use in households or were ordinarily used for household purposes, but whether they were of a kind ordinarily used for household purposes.''
50. Tamberlin J, having agreed with the reasons and conclusions of Hill J, added (at ATC 4200; ATR 300-50; FCR 575):
``The exemption is directed not to the question what is an ordinary household purpose, but rather to the issue of whether a particular type of safe or security cabinet is `ordinarily used' for household purposes. This involves a consideration of `household purposes'. The provision recognises by the use of the word `ordinarily' that use for `household' purposes can encompass a broad spectrum. Some types of safes may be used for household purposes but not commonly so.... Exemption focuses on `ordinary use' and the criterion to be applied is whether the kind of goods in question is `ordinarily used' for household purposes.''
51. His Honour went on to say (at ATC 4200; ATR 301-19; FCR 576):
``Because the exemption is concerned with the `kind' of goods it is not appropriate or necessary to limit the evidentiary material to that which relates solely to the particular products of a single manufacturer. It is permissible to consider products of a similar type made by other manufacturers in respect of size, dimensions, cost, capacity and security rating, for example.''
52. Though not necessary for its decision, the Full Court of the Federal Court in
K-Mart Australia Limited v FC of T 96 ATC 4155 at 4159; (1996) 31 ATR 524 at 529-0 approved the approach to construction of the preamble to Item 1 in its earlier decisions in Diethelm and Chubb. In K-Mart, the Commissioner conceded that the paint brushes in dispute, which were sold by retail to householders, were within the terms of the preamble to Item 1, and the court had to consider whether they were ``brushes'' of the kind falling within the specific terms of paragraph 1(j) of the old Item 1 or paragraph 1(1)(k) of the new Item 1.
Other direct authority
53. The preamble to Item 1 has also been considered by the Federal Court constituted by a single judge:
Woolworths Ltd v FC of T 99 ATC 4187; (1999) 41 ATR 223;
OR Cormack Pty Limited v FC of T 92 ATC 4121; (1992) 23 ATR 151;
Hygienic Lily Limited v FC of T 87 ATC 4327; (1987) 18 ATR 619, and by various state Supreme Courts:
FC of T v Kentucky Fried Chicken Pty Limited & Anor 88 ATC 4363; (1988) 19 ATR 1141 (SC NSW - Court of Appeal); Kentucky Fried Chicken Pty Limited v FC of T & Ors (SC of NSW supra at first instance); and
FC of T v Sherwood Overseas Pty Ltd 85 ATC 4267; (1985) 16 ATR 473.
54. In Woolworths one question for the Court was whether plastic food containers with resealable lids sold by Woolworths together with the contents were goods of a kind ordinarily used for household purposes within the meaning of the preamble to Item 1. The plastic containers were used in Woolworths' delicatessen departments for the sale of its delicatessen products. They were not available for separate retail sale by Woolworths but there was evidence that Franklins sold by retail what to the eye were similar containers, but of apparently superior quality.
55. The Court found that the containers were washable and could be re-used by consumers several times for the storage of food and with careful use would retain their shape after many years of storage. Hely J said (at 4195):
``... The issue is whether the food containers in question are goods of a kind ordinarily used for the household purposes of storing food. Given the uses to which the instant products can be put, and the fact that containers similar to, and of the same kind as the plastic food containers have been available for sale by retail to householders, the applicant has made out a case for the declaration which it seeks in this respect.''
56. In OR Cormack (as in K-Mart, at least as to the paint brushes), the Federal Court considered whether certain paint and wire brushes and paint rollers commonly used by households were covered by the old Item 1. The Court held that whether or not those goods were within the generic terms of the preamble to Item 1 taken alone, they were not ``brushes'' within the context of the specific terms of paragraph (j) of the old Item 1 and were not therefore covered by the whole collocation of words used to mark out the scope of the Item so far as it concerned ``brushes'': (See esp. at ATC 4125; ATR 156-25).
ATC 2391
57. In Hygienic Lily, the Federal Court considered whether three sizes of wax coated paper cups bearing the McDonald's logo used to sell and serve drinks in McDonald's restaurants were goods of a kind ordinarily used for household purposes within the meaning of the preamble to Item 1. In holding they were members of a class or genus - ``cups'' - commonly used for household purposes viz the carrying and consumption of beverages, Gummow J followed the reasons of the High Court in
FC of T v Newbound & Co Pty Limited (1952) 10 ATD 59 and considered with approval the reasons of the Federal Court in Sherwood Overseas and of the Supreme Court of NSW in Kentucky Fried Chicken. In doing so, his Honour said (at ATC 4332; ATR 625-2):
``... Whilst [in Newbound] there is no authoritative guidance for the resolution of the present question of construction of Item 1, it is to be observed, as the applicant submitted, that the term `household' was, at least by the majority [in Newbound], not read as limited to activities solely pursued in a domestic setting.''
58. The fact that the paper cups were for concurrent use for McDonald's commercial purposes was also considered. His Honour said (at ATC 4331; ATR 623-20):
``... However, in my view, that does not deprive them of the character of goods of a kind ordinarily used for household purposes. Item 1 does not predicate the criteria for classification upon so single faceted a method of characterisation.''
59. Referring to the decision in Kentucky Fried Chicken as to whether paper serviettes provided to purchasers of food and services were within the exemption in Item 8(1)(b) of the Third Schedule in favour of ``Household drapery and soft furnishings, namely... table napkins'', his Honour went on to say (at ATC 4332; ATR 625-29):
``... In my view in the same way that these goods did not cease to be of that character by their use in connection with the supply of goods or services to customers at Kentucky Fried Chicken `outlets', the paper cups in the present case are goods of a kind ordinarily used for household purposes.''
60. Similarly, in Sherwood Overseas the Supreme Court of WA considered whether a vacuum operated domestic swimming pool cleaning device was a cleaning appliance of a kind ordinarily used for household purposes. Olney J said (at ATC 4271; ATR 477-29):
``... I do not understand the Commissioner to have advocated that an article can only be regarded as ordinarily used for household purposes only if its ordinary use is within the four walls of a dwelling house. Indeed some of the items specified in the Third Schedule are inevitably used out of doors whereas a number of others can commonly be found in use both inside and outside.
In my opinion a robust approach ought to be taken to the construction of the Third Schedule particularly in view of the fact that it is part of a statute imposing taxation and I take the view that any goods which fall within the particulars described in paras. (a) to (p) of the first item which are ordinarily used in or about a dwelling house can fairly be said to be ordinarily used for household purposes.''
61. In Kentucky Fried Chicken, there had also been a dispute as to whether plastic spoons included with meals sold to consumers, and otherwise supplied to consumers, were ``goods... of a kind ordinarily used for household purposes, namely... (b) cutlery...''. Yeldham J noted (at ATC 4709; ATR 1048-3):
``The Commissioner does not oppose the making of a declaration to the effect that the red plastic spoons in question come within this description...''
62. And, approving the reasons of Olney J in Sherwood Overseas, Yeldham J said (at ATC 4710; ATR 1048-25):
``... some of the items specified in the Third Schedule are inevitably used out of doors whereas a number of others can commonly be found and used both inside and outside.''
``Of a kind''
63. Further to the above authorities, the Federal Court in GKN Australia Limited considered whether components of demountable scaffolding were equipment ``of a kind'' used exclusively or primarily and principally in the course of certain industrial operations within the meaning of Schedule 1 to the old classifications Act. As to the meaning of the words ``of a kind'', Foster J (at ATC 4419; ATR 323-31) applied the reasons in Diethelm referred to above. His Honour (at ATC 4421; ATR 326-22) also approved the reasons in
ATC 2392
``The words `of a kind' in the context of item 83 do not refer to the uses for which the particular goods in question are designed or manufactured, nor to the purpose to which it is intended that those particular goods shall be put, but `rather to the nature, quality and adaptation of goods in the class or genus in question': cf. Hygienic Lily Ltd v DFC of T 87 ATC 4327 at p 4330; (1987) 13 FCR 396 at p 399 per Gummow J.''
``Ordinarily used''
64. In OR Cormack, Davies J said (at ATC 4124; ATR 154-50):
``The adverb `ordinarily' does not have a precise denotation. It requires a use of the goods which lies between `primarily or principally' on the one hand and mere `use by' on the other. The adverb conveys the meaning of `generally' or `customarily' or `usually'. Sometimes the term `commonly' is used as an analogue, but only, I think in the same way that the adjective `common' is used in the term `common parlance' as referring to customary or usual speech.... The words `ordinarily used' likewise seem to refer to settled or usual use. But I would accept that the adverb must be applied in relation to the goods described and may have a somewhat different application with respect to some goods than with respect to others. In each case, the task is merely to determine as a matter of fact whether goods in issue fall within the description used by Item 1.''
65. What was said by Davies J was adopted by the Full Court of the Federal Court in Chubb (per Hill J at ATC 4195; ATR 296-10; FCR 570), and has since been followed in Woolworths and in
Airovent Pty Ltd v FC of T 98 ATC 4800; (1998) 39 ATR 293.
66. In Airovent, the Federal Court considered whether certain exhaust fans commonly installed in commercial kitchens were within the meaning of ``equipment of a kind ordinarily used in the course of industrial operations to protect persons engaged in those operations''... within the meaning of Item 20, Schedule 1 of the new classifications Act. Sackville J said (at ATC 4806; ATR 301-18):
``As I have explained, the expression `ordinarily used' in Item 20 means commonly or usually used, not exclusively or principally used.''
Whether sole or more than one user
67. The courts have also considered whether exemption and concession items in sales tax legislation defined in terms of use for a particular purpose or use by a particular person import any test of exclusive or predominant use for that purpose or by that person. The Full High Court in
DFC of T v Stewart & Anor 84 ATC 4146; (1983-1984) 154 CLR 385 considered whether certain lottery ticket vending machines bailed by the manufacturer of the machines to public benevolent institutions were ``for use by'' those institutions and therefore within the exemption Item covering ``goods for use... and not for sale by... (c) a public benevolent institution''. The manufacturer carried on the business of selling bulk tickets to be issued and sold by those using the machines. The Court held (Murphy J dissenting) the machines were for use by the institutions. It found it was not relevant that the machines might also be for use concurrently for the commercial purposes of the manufacturer. Deane J said (at ATC 4155; CLR 401):
``From this variety of references [throughout the Schedules to the Sales Tax Exemptions & Classifications Act] to `goods for use', three presently relevant points emerge with tolerable clarity. The first is that, where it is intended that goods be for use exclusively or `primarily and principally' before they come within a particular exemption, the First Schedule expressly says so. The second is that, where the relevant requirement is that the goods be `for use by' a particular person or organization... the requirement is referring to projected actual use rather than the inherent quality or nature of the goods themselves. The third is that, in those items (such as Item 81) where it is required that goods be `for use' by a particular category of person or organization, there is no designation of any person, such as the manufacturer or the purchaser of the goods, by reference to whose purposes or intentions the question whether the relevant requirement is satisfied must be determined...
Item 81 does not require that the goods be used `exclusively' or `primarily and
ATC 2393
principally' by a public benevolent institution. It suffices that the goods come within the classification of goods for use by such an institution. That does not mean that any intended or planned or possible subsequent use of the goods by a public benevolent institution, however transient or insignificant or uncertain, would justify the goods being characterized as `goods for use' by that institution...''
68. His Honour also said (at ATC 4155-4156; CLR 402):
``... It is true that, in the wider context of the overall business of the respondents' `organization', the machine could properly be seen as also being used by the respondents in their business. In the absence of any requirement of exclusive or primary or principle use however, that consideration does not preclude the machine from being properly characterized as `Goods for use... and not for sale, by... a public benevolent institution'.''
69. Similarly, Gibbs CJ (with whom Dawson J agreed) said (at ATC 4149; CLR 390):
``... The word `use' does not connote exclusive use. Where it is intended that the use should be exclusive, express provision is made in the Schedule to that effect... No doubt an article would not fall within Item 81 if the use to which it was to be put by the hospital or institution was transient or insubstantial; the suggestion in FC of T v Hamersley Iron Pty Ltd 81 ATC 4582 at p 4590; (1981) 37 ALR 595 at p 605, that the goods must be for use `to a significant degree', would appear to be correct.''
70. Brennan J's reasons were in similar terms. His Honour said (at ATC 4153; CLR 397):
``The use by a public benevolent institution referred to in Item 81 is not necessarily exclusive of the use of the goods by others. Indeed, the use of particular goods by others is often the use intended for them by public benevolent institutions - hospital beds, for example.''
71. In
Transfield Kumagai Contracting Pty Ltd v FC of T 90 ATC 4960; (1990) 21 ATR 1003 the Supreme Court of NSW again considered whether certain otherwise taxable goods supplied for use in connection with the Sydney Harbour Tunnel were covered by Item 74, First Schedule to the old classifications Act as ``goods for official use... of an authority... of a State''. The goods were to be used by the private contractor charged with operating the tunnel in conjunction with the Roads and Traffic Authority of NSW during the term of the contractor's lease, and to vest in the authority upon termination. Grove J said (at ATC 4963; ATR 1006-13):
``... It is clear that relevant use need not be exclusive (DFC of T v Stewart 84 ATC 4146; (1983-1984) 154 CLR 385; 15 ATR 387 nor do I contemplate that immediate physical association between the user and the object is essential. To use in an ordinary sense is to utilise, to take advantage of or to exploit.''
``Household purposes''
72. In addition to the decisions in Diethelm and Chubb already considered above, there is other authoritative interpretation of the adjectives ``household'' and ``domestic'' in the context of the sales tax and other legislation.
73. In Newbound, the majority of the Full High Court held that the expression ``household fittings'' as it appeared in Item 90D, First Schedule of the old classifications Act should not be read as limited to activities solely pursued in a domestic setting. Item 90D covered:
``90D Household fittings... of a kind installed in houses or other buildings so as to become fixtures therein namely-
- (1)... pedestal lavatory basins.''
74. The majority held that a wash fountain which was by design adapted for use by a number of persons at the same time, and was more usually installed in institutions, factories, etc was nevertheless a household fitting which was a pedestal lavatory basin. Fullagar J (with whom Williams J agreed) said (at 62.8):
``The words [`household fittings'] are vague and elastic. We give them an entirely natural interpretation if we treat them as meaning fittings which serve a household purpose (such as washing of hands or clothes).
... It is impossible to treat the words `household fittings' as meaning fittings fitted in a dwelling house: the reference to `other buildings obviously excludes any such interpretation.'''
75. Webb J said (at 64.4):
ATC 2394
``No doubt the purpose for which it is manufactured is a material consideration, and in the case stated it is agreed that this wash fountain is designed for use in factories, hospitals and the like and not for an ordinary household, that is for a family. But a household may be comprised of persons who are not related. A number of friends might occupy the same dwelling, and with or without their children, but more particularly with their children, they might be so numerous and living under such circumstances say in a holiday house at the seaside that a wash fountain would be found very desirable and installed. It is difficult to deny that the wash fountain would be a household fitting in such circumstances. Other examples could be given of cases in which a wash fountain would be properly be regarded as a household fitting.
An article may at the same time be a household fitting and a factory fitting,...
But one argument of Mr Bowen for the defendant company seems to me to be sound, namely, that this wash fountain wherever installed is, because of its exclusive purpose ie washing of hands, of an essentially domestic nature...''
76. Authoritative English decisions also inform the meaning of the adjective ``domestic'' in the phrase ``domestic purposes''. In
Pigeon v Great Yarmouth Waterworks Co [1902] 1 KB 310, the High Court considered whether water supplied to the premises in which the occupier carried on the business of a boarding house was for domestic purposes. The water was only used in the premises for cleansing, cooking, drinking and sanitary purposes. Lord Alverstone CJ said (at 314.1):
``... `domestic purposes' in my opinion include the use of water for the ordinary purposes of domestic life by inmates of the house''
77. Darling J said (at 315.1):
``I think this case would be very different if the water were used for purposes which could not accurately be described as `domestic' - that is, for any purpose beyond washing, and drinking, cooking and sanitary purposes within the house.''
78. In the same case Channell J said (at 315.2):
``... Although the supply for domestic purposes is paid for on the annual value, it does not make any difference whether the inmates of the house are guests who are entertained by the occupier at his own expense, or whether they pay for their board and lodging, or whether they are pupils whose parents pay for their board and lodging, or whether they are paupers for whom the parish pays.''
79. In
Barnard Castle Urban Council v Wilson [1902] 2 Ch 746 the Court of Appeal considered the question whether water supplied to the swimming pool of a school was supplied for domestic purposes. It was held it was not. Rather it was for the purposes of the business of the school (per Romer LJ at 757.5; Stirling LJ at 758.7); or for the more effectual teaching at the school (per Vaughan Williams LJ at 755.8). Supply for the swimming pool was distinguished from supply for other purposes. Stirling LJ agreed that the carrying on of the school is a business, but said (at 758.5):
``... I think that a supply of water to the house in which the scholars live would be a supply for domestic purposes.''
80. In
Southwest Suburban Water Co v Guardians of the Poor of St Marylebone [1904] 2 KB 174, the High Court considered the question whether water supplied to occupier of the school was supplied for domestic purposes. Buckley J said (at 179.7):
``It is the character of the purpose, not the character of the premises in which the water is used, that is here the important factor. The test of residence is not a test of the purpose of the user. If the contention be well founded then a factory would be excluded from a right of supply [at the concessional domestic purposes rate] for even sanitary purposes - a conclusion at which I would be very slow to arrive.''
81. Buckley J went on to say (at 180.3):
``There is no question in my opinion but that these [school] premises constitute a dwelling house (
Liskeard Union v Liskeard Waterworks (1881) 7 QBD 505).''
82. His Honour also said (at 180.5):
``I agree that these [school] premises are used to carry on a business... I should say that it is the business of providing for, maintaining and training pauper children and that this is nonetheless a business
ATC 2395
because it is carried on not for profit, but on the contrary at large expense... but although that which is carried on upon the premises is a business, it is in my opinion perfectly consistent that in business premises water may be wanted for domestic purposes. The question is what is the character of the purpose, not what is the character of the place of user.''
83. In relation to the Barnard Castle case referred to above, Buckley J said (at 183.2):
``But I think that the result of the [Barnard Castle] case is that in arriving at a decision on the words `for domestic purposes' regard must be had to that which is reasonable having regard to the purposes for which according to the ordinary habits of domestic life in this country people require water in their houses.''
84. His Honour concluded by saying (at 184.4):
``So far as [the boilers used on the school premises]... are employed simply for the supply of hot water for laundry purposes the user I think is domestic.''
85. In
Southern Suburban Gas Company v Metropolitan Water Board [1909] 2 Ch 666 the High Court considered the question of whether water supplied to a gasworks at which no one resided was used for domestic purposes to the extent that it was used for drinking and washing and for lavatory and other sanitary conveniences. Following the decision in Southwest Suburban Water Co, Neville J said (at 674.8):
``It seems to me that those decisions show that the enquiry is not whether the premises are used for business purposes but whether the water is used for business purposes or domestic purposes, and that the uses in the present case are domestic.''
86. Similarly, in
Colleys Patents Ltd v Metropolitan Water Board [1912] AC 24 the House of Lords considered the question whether water supplied to factory premises in which no one resided was used for purposes of trade, manufacture or business. The water was used for drinking, and washing by the workmen and for cleansing urinals and water closets used by them. Earl Loreburn LC said (at 31.6):
``... A supply for such purposes as exist in the present case is not a supply for purposes of `trade, manufacture or business' at all.''
87. In
Attorney General v Milliwatt Ltd [ 1948] 1 All ER 331, the High Court considered the question of whether certain electric heating pads and blankets advertised for use for medical and therapeutic purposes as well as for general domestic use were ``appliances and apparatus of a kind used for domestic purposes''. The goods were in fact widely used for domestic purposes. Cassels J said (at 332D):
``I think `domestic' in the present case means the house or home. A great variety of articles go to make up a home not because they are necessary but because they are calculated to contribute to the comfort and well being of people in the home. Such articles may be said to be used for domestic purposes. The fact that any one of these articles may be used for medical purposes does not prevent its being an article of a kind used for domestic purposes.''
88. The respondent's List of Authorities includes the following decisions (cited in full at paragraph 24 supra): Hopper Nominees Ltd v Rodney District Council; Davis v Johnson; and Simmons v Pizzey. In each case the court considered the meaning of ``household'' as a noun sense and in contexts distinguished from the present.
89. It is submitted none of the reasons for decision in those cases assist the present case. In Davis, the House of Lords considered the proper jurisdiction of the County Court to make orders under the Domestic Violence and Matrimonial Proceedings Act 1976 (UK). The respondent applied to the Court for injunctions under s. 1(1)(a), (b) and (c) to restrain the appellant from molesting her or her child and to exclude him from their residence, a council flat. By s. 1(2), subsection (1) applied in the same way to:
``... a man and woman who are living with each other in the same household as husband and wife as it applies to the parties to a marriage and any reference to the matrimonial home shall be construed accordingly.''
90. There was no judicial consideration as to what was and what was not meant by the noun ``household'' used in that provision. And it was not disputed, and there was no judicial consideration of the point whether the parties together, or either of them separately, was living in the same ``household''.
ATC 2396
91. Rather, the only issue in those proceedings touching the use of the word ``household'' in subsection (2) was a technical one of construction of an altogether different nature, that is to say whether the subsection could have any application given that at the time of the County Court order, the man was then living alone in the flat, the woman having fled in fear of her and her child's safety.
92. It is submitted the reasons in Davis are of no assistance in the present matter.
93. It is submitted the reasons in Simmons are equally unhelpful. In that case, the House of Lords considered whether a refuge for battered wives and their children was at the relevant time a ``household'' in multiple occupation, or in single occupation. If in multiple occupation, then it was occupied by a number of residents in excess of the maximum permitted by a notice issued under the Housing Act 1961 (UK). Lord Hailsham of St Marylebone (with whom Lord Wilberforce, Lord Fraser of Tullybelton and Lord Keith of Kinkel agreed) said (at 17F):
``I would have supposed in any case that the expression `household' and membership of it is a question of fact and degree, there being no certain indicia the presence or absence of any of which is by itself conclusive.''
94. His Lordship also said (at 18-A):
``... I cannot regard a temporary place of refuge for fortuitous arrivals as ordinarily forming a household at all. These residents come from a variety of homes and may have gone to a variety of different places after leaving No. 369.... They never had the intention to use No. 369 as more than a temporary harbour in a storm. Whilst they were in No. 369 no doubt each looked after her own children where possible, I do not think that every community consisting of temporary migrants housed under a single roof reasonably organised constitutes or can constitute a single household. I do not think this is necessarily true of a hostel, a monastery or a school, but certainly not of a temporary haven in a storm.''
95. Their Lordships reasons touch only upon the meaning of the noun ``household''. They do not inform the meaning of the phrase ``household purposes'' or any other adjectival sense of the word ``household''.
96. In Hopper Nominees, the New Zealand High Court also considered the meaning of the noun ``household''. It was in the context of whether a rest home with a maximum number of residents of 37 was a single ``household'' for the purposes of the Rating Powers Act 1988 (NZ). The rest home was a private commercial undertaking. It provided accommodation, meals, cleaning and care for residents, each of whom had a private room with bed, basin and water closet. They shared common bathrooms, lounge rooms and dining rooms. Altogether there were 41 water closets installed in the premises.
97. The Act authorised a rating authority to impose a sewerage levy pro rata according to the number of water closets installed, but that rate was subject to an exception in the following terms:
``30(2) ... every separately rateable property used exclusively or principally as the residence of not more than one household shall be deemed to have not more than one water closet or urinal.''
98. Anderson J said (at 242-28):
``As a matter of commonsense, recognising that the scope of the exception is intended to be restricted, I am of the opinion that the likely legislative attempt was to exclude from the impact of the rating power, families or family situations where homes might have more than one water closet but where the use of water closets would be merely domestic and therefore limited. Such an intent is most consistent, I think, with the ordinary New Zealander's concept of a household, namely an organised family including servants or attendants, dwelling in a house. (See the Oxford Dictionary (2nd. Ed)).''
99. His Honour also said (at 242-52):
``In the case of a rest home, it is perhaps conceivable that a resident might regard his or her domestic situation as a [single] person household, but even if such a situation existed in the present case, the exception in s. 30(2) would not apply because there would be more than one household for which the separate rateable property was used exclusively or principally as the residence thereof.''
100. With respect, that must no doubt be correct. But the decision is concerned with what
ATC 2397
is a ``household''. It is submitted it is not to the point of the present case viz. what are ``household purposes''.101. The result in Hopper Nominees is distinguished from the Australian and English authorities considered above precisely because the exception under consideration in Hopper Nominees was focused upon residences occupied by a single ``household'', that is to say defined by reference to the noun ``household''.
102. The distinction between the proper construction of the adjectival phrase ``household purposes'' and the meaning of the noun ``household'' severed from its context, is brought into sharp relief by returning to the Australian and English authorities which have considered the relevant expressions ``household purposes'' and ``domestic purposes'': See also: Telstra Corporation Ltd per Lindgren J at ATC 4817; ATR 304-50 (cited in full at para. 23 supra).
103. Accordingly it is submitted that the reasons in Hopper Nominees are also of no assistance in the present case.
104. In particular, those cases do not disturb the proposition for which there is high authority that the phrases ``household purposes'' and ``domestic purposes'' focus attention upon the nature of the purposes served, irrespective of the places where or the circumstances under which those purposes might be served.
Part D - Relevant tests as submitted in Applicant's Outline
105. The Applicant has submitted (and see clause 128 of the Applicant's Outline) that the cases referred to above provide authority for the following propositions concerning the proper construction of Item 1:
(a) The words ``goods of a kind ordinarily used for household purposes'' should be given the most natural and ordinary meaning appropriate in the circumstances.
(b) The expression is not to be construed by severing its words, defining them separately, and then reconstructing and giving to the expression a meaning which it cannot bear without distortion of the English language.
(c) The expression is to be construed in a robust and not in any narrow way.
(d) If the construction of the expression is seriously in doubt, it should be construed in favour of the Applicant's claim that the concessional rate applies to the goods.
(e) Whether particular goods fall within the preamble to Item 1 is not determined by an enquiry as to the ``essential character'' of the particular goods (and see below for further detailed discussion of this proposition).
(f) The preamble to Item 1 involves no enquiry as to the manner in which particular goods or goods of a particular kind may be ``marketed''.
(g) Whether particular goods fall within the preamble to Item 1 does not turn upon the answer to two separate questions, viz.:
- (1) How should the particular goods be categorised; and
- (2) Is that category of a kind ordinarily used for household purposes.
(h) The proper approach is to ask whether the particular goods are within a kind, class or genus of goods which answer the description goods ``of a kind ordinarily used for household purposes''; that is to ask, are they within the preamble to Item 1 taken as a whole.
(i) It is not relevant whether the particular goods are in fact ordinarily used for household purposes. What is relevant is whether the particular goods are of the same kind as other goods of a kind ordinarily used for household purposes.
(j) To determine whether particular goods are goods of a kind ordinarily used for household purposes it is not relevant whether goods of that kind are in fact used in or about residential dwellings. What is relevant is whether goods of that kind are ordinarily used for household purposes irrespective of where those purposes may be served.
(k) It is not relevant whether households ordinarily possess goods of the kind to which the particular goods belong. The existence of such goods may in fact be rare. What is relevant is whether, when goods of that kind are in fact used, they are ordinarily used for household purposes.
(l) To determine whether particular goods are goods of a kind ordinarily used for household purposes, it is not relevant whether goods of that kind are ordinarily used for one or more other purposes. What is relevant is whether goods of that kind are ordinarily, that is to say regularly, customarily, usually or commonly,
ATC 2398
used for household purposes irrespective of other uses.(m) Where particular goods are goods of a kind ordinarily used for household purposes and for other purposes (including a commercial purpose), it is not relevant what types of purposes those other purposes may be.
(n) Where particular goods are goods of a kind ordinarily used for household purposes, and for other purposes, it is not relevant that goods of that kind may ordinarily serve household purposes concurrently with one or more of those other purposes (including commercial purposes).
(o) Where particular goods are goods of a kind ordinarily used for household purposes, and for other purposes, it is not relevant that they may concurrently be used to serve the purposes of more than one person.
(p) Determination of whether particular goods belong to a kind of goods ordinarily used for household purposes does not turn upon whether goods of that kind are used ``exclusively'' or ``primarily and principally'' or ``mainly'' for household purposes. What is relevant is whether the goods are of a kind ordinarily, that is to say regularly, customarily, usually or commonly, used for household purposes, provided always that such use is not transient or insubstantial.
(q) To determine whether particular goods are goods of a kind ordinarily used for household purposes, it is not relevant whether the particular goods differ by degrees from other goods of the same kind. They may differ in specification, have more or less or different features, be more or less durable, more or less expensive, or manufactured in Australia or overseas. Whether particular goods belong to a kind of goods ordinarily used for household purposes is a question of fact and degree to be determined in a common sense way.
(r) For the purposes of determining whether particular goods are goods of a kind ordinarily used for household purposes, there is no relevant distinction to be drawn between goods of a kind ordinarily used for household purposes by single users and goods of a kind ordinarily used for household purposes by multiple users.
(s) What is relevant in every case is to answer the question - are the particular goods within the meaning of the collocation of words - ``goods of kind ordinarily used for household purposes''.
Part E - Ruling SST11
106. (a) The Applicant's contentions in relation to Sales Tax Ruling SST 11 are set out in paragraphs 129 to 138 of the Applicant's Outline as follows:
``Rulings Binding the Commissioner
129 The Commissioner's published ruling No. SST 11... (` the Ruling ') binds the Commissioner: s. 77, Sales Tax Assessment Act 1992.
130 It is submitted that paragraphs 3.8 to 3.13 of the Ruling generally reflect the legislation and the authorities, and in particular the proposition that where classification turns upon `use' which is otherwise unqualified or unquantified it does not import `exclusive' or `principal' or `predominant' or `main' use. The ruling states (at para. 3.13) that what is required is that
`They are to be used to a real or significant extent in the way required by the Item. An occasional or insubstantial use is not enough.'
131 Paragraphs 3.24 and 3.25 of the ruling notes that certain classification items are expressed to turn upon the manner in which goods might be `marketed'. The Ruling does not suggest in those paragraphs, or elsewhere, that a `marketing' test where not expressly stipulated is to be imported or implied into the terms of any other item for the purposes of classification.
132 Paragraphs 3.27 to 3.30 consider the meaning of the words `of a kind ordinarily used'. It is the Applicant's submission that at paragraph 3.27 the Respondent correctly states:
`This description envisages a settled or common use of a class of goods rather than an individual product. The exemption or classification may apply even if the goods are used in more than one way. The important question is not whether particular goods are used in the way specified in the item but whether the goods belong to a class or genus of goods that is commonly used in that way.'
ATC 2399
133 Contrary to disputing the authorities referred to above in support of those propositions, the Ruling adopts them. Further, at paragraph 4.3 the Ruling expressly rejects classification according to `essential character' rejected by the Full Federal Court in Diethelm and in Chubb, in favour of the determination of the relevant kind, class or genus.
134 Notwithstanding that the Ruling correctly gives primacy to the relevant use, in the present case the Respondent Commissioner's reasons for decision turn expressly and exclusively upon considerations of ` essential character ' and ` appearance ' without reference to use: See section 37 documents - 2nd last and last paragraphs at p 9 in matter No. NT 98/149; and 2nd last and last paragraphs at p 12 in matter No. NT 98/415. By so doing the Respondent Commissioner repudiates all relevant authority.
135 Further it is submitted the Commissioner's reasons for decision misrepresent the Applicant's primary submissions as to the relevant law. In particular the Commissioner's reasons for decision attribute to the Applicant the proposition that:
`... as the laundering of clothes is a household purpose, all washing machines belong to a genus of goods that are ordinarily used for household purposes.'
(See section 37 documents - 2nd last paragraph at p 7 and 1st paragraph at p 9 in matter No. NT 98/149; 2nd last paragraph at p10 and at 2nd last paragraph at p 11 in matter No. NT 98/415.)
136 It is a matter of record that at no time has the Applicant relied upon that proposition: See section 37 documents - paragraphs under heading `Relevant tests' at p 58 in matter No. NT 98/149; and at p 61 in matter No. NT 98/415.
137 Attributing that proposition to the Applicant also reflects the Commissioner's failure to apply the Ruling to the fact that the disputed laundry equipment is of a kind exclusively or substantially used directly by persons to launder clothes of members of their households and their other household linen, whether in shared laundry facilities of residential accommodation of various kinds, or in laundromats, and whether or not fitted with coin-operated activating mechanisms: See section 37 documents - esp. paragraphs under headings `Household purposes'; `Group 1'; and `Group 2' at pp 59, 61 and 62 in matter No. NT 98/149; and at pp 62, 64 and 65 in matter No. NT 98/415.
138 It is therefore submitted that the Commissioner's reasons for decision not only misrepresent the Applicant's submissions and misapply the relevant law. They also fail to apply Ruling SST 11 which is binding upon the Commissioner and would in the present case have required a decision allowing the Applicant's objection in full.''
(b) While the Ruling is binding on the Respondent, it is cast in general terms, such that it would be difficult, if not impossible, for any taxpayer to contend that, in accordance with the Ruling itself, any particular goods attract the concessional rate.
Part F - Exhibit A7
107. (a) Exhibit A7 is entitled ``Sales Tax Decisions 1964 AGPS''. The Applicant submitted in relation to Exhibit A7 (and in accordance with clauses 139 and 140 of the Applicant's Outline) as follows:
``139 The Applicant also refers to paragraphs 691 and 692, Sales Tax Decisions 1964 AGPS (Exh. A7). It is submitted that whether or not binding upon the Commissioner, paragraphs 691 and 692 are consistent with:
- (1) the authorities cited above; and
- (2) the Commissioner's Ruling no SST11.
140 It is also submitted that paragraphs 691 and 692 are persuasive at least in so far as they establish that the Commissioner's objection decisions in the present case are inconsistent with the Commissioner's own internal directives and binding published rulings which follow authoritative decisions of the courts.''
(b) Clauses 691 and 692 of Exhibit A7 are as follows:
``691 The expression `houses' in item 90F(1), First Schedule, is interpreted so as to include flats, boarding houses, boarding
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schools, hostels, hotels, motels, fixed forestry camps and migrants' camps established by the Department of Immigration, subject to the exclusion of any activities in such places which are not of a domestic character, i.e., which are not connected with the residential activities of such establishments, but rather associated with commercial activities such as the sale of goods in bars, canteens, shops,... Restaurants, cafes, canteens, factories and other commercial and industrial establishments are not regarded as `houses' for the purposes of item 90F(1).692 The expression `household purposes' in item 1, Third Schedule, and the word `houses' in item 90B(2), First Schedule, are to be interpreted in accordance with the meaning attributed to the word `houses' in item 90F(1), paragraph 691.''
(c) It is to be noted that the Respondent has previously taken the view that a household extends beyond the concept of a nuclear household. The Respondent contends that those views belong in the past and that the term ``household'' in present times must have the ``nuclear family'' meaning set out earlier in these Reasons.
Part G - The respondent's arguments as to ``essential character''
108. Mr McGovern argued at some length that the ``essential character'' test referred to in the judgment of French J in Diethelm's case is not, despite some views to the contrary, to be disregarded. Specifically in this context:
(a) In Diethelm's case, Hill J said (at ATC 4718; ATR 482-30; FCR 470) that:
``Phrases such as `essential character' have sometimes been used to express this search for objective criteria, as is illustrated by the judgment of French J which I have had the privilege of reading.... In other cases the phrase `essential character' may be thought itself to suffer some lack of precision.''
Mr McGovern submitted that Hill J did not, in referring to the judgment of French J, state that he disagreed with it.
(b) And in Chubb's case, Hill J again did not state that he rejected the essential character test specified by French J in Diethelm's case.
(c) French J had said in Diethelm (ATC 4712; ATR 474-45; FCR 462):
``The phrase `essential character' appears in a number of cases as an indicator of the kind of process necessary for characterisation of articles for the purpose of determining whether or not they are caught by some goods-related impost. In Thomson Australian Holdings Pty Ltd v FC of T 88 ATC 4916; (1988) 20 FCR 85, that phrase was used by Davies J to describe what must be ascertained to determine whether a liquor guide and a car dealer's guide fell within the First Schedule exemption of `books, pamphlets, periodicals, magazines and printed music, (not including) catalogues or price lists'. There was no express purposive use element in the classification in issue. Nevertheless the question of the `essential character' of an article said to fall within an exemption is a question to be posed even in those cases in which the class is partly defined by reference to purpose. As explained by his Honour at ATC p. 4917; FCR p. 86, the essential character of goods is `what essentially the goods are, not some characteristic that the goods might have. Essential character derives from the basic nature of the goods, from what they are, though composition, function and other factors necessarily play a part.' In the context of the newspaper exemption, his Honour linked that test with the popular usage criterion referred to by Stephen J in Rotary Offset Press (supra). A purposive element was also admitted:
`Evidence which clarifies the manner in which a publication circulates and the use to which it is put, that is to say its function or purpose, is undoubtedly of assistance in determining what the essential character of the publication is. (at ATC p. 4917; FCR pp. 86-87).'
The formulation of the `essential character' test was not disputed on appeal to the Full Court which, in affirming the decision given by Davies J, did not question the formulation - FC of T v Thomson Australian Holdings Pty Ltd & Ors 89 ATC 4696 at 4698; (1989) 25 FCR 481 at 482.
The question of characterisation under Item 1 of the Third Schedule was considered by Gummow J in Hygienic Lily Limited v DFC of T 87 ATC 4327; (1987) 13 FCR 396. The issue in the case was whether wax coated paper cups sold at a fast food outlet were
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within para (c) of Item 1 as `... articles that are made of a material other than glass and are used for purposes similar to the purposes for which glassware is used'. Referring to the opening words of Item 1, his Honour held that goods are able to be classed as `ordinarily used for household purposes' even though not exclusively or principally so used. And the phrase `goods of a kind' in this setting was directed to the nature, quality and adaptation of goods in the relevant class.''
(d) And at ATC 4714; ATR 477-40; FCR 465, French J referred to the relevance of the market into which the goods are sold in the following terms:
``In the present case the essential character of the chairs in issue was correctly identified as office furniture. That characterisation reflects the market in which the chairs were manufactured and sold having regard, inter alia, to their quality, cost, design, and intended and actual purchasers. While they were chairs sometimes used for household purposes, and performing physical functions similar to such chairs, they were not of a kind ordinarily so used. Having regard to the purpose of Item 1 and applying the canons of popular usage and objective characterisation with due regard to the market purposes to which I have referred, the chairs in question fell outside Item 1. In my opinion his Honour's decision was correct and the appeal should be dismissed with costs.''
(e) The relevance of the market for this purpose was doubted by Hill J in a passage quoted earlier in these Reasons.
(f) The decision in Diethelm is of such critical importance that there are other passages from the judgment of Hill J which should usefully be included; there is to a minor extent, perhaps some repetition of passages extracted from the Applicant's Outline, but in the view of the Tribunal limited repetition is preferable to cross-referencing:
- (1) At ATC 4718; ATR 481-48; FCR 470-
``It must be noted that the question to be asked is not whether these particular goods are ordinarily used for domestic purposes. Clearly Parliament was at pains to ensure that the actual destination of the goods the subject of a taxable sale would be irrelevant to the question whether they fell within the exemption.''
- (2) At ATC 4720; ATR 483-47; FCR 472-
``For the appellant it was submitted that there were two separate questions to be answered. The first was how the goods in question should be categorised. The second, once that had been answered, was whether that class of goods was of a kind ordinarily used for household purposes. In respect of this second question it was submitted function should be taken into account. This submission would then, as I have already indicated, proceed to characterise the goods in question as being chairs and the function of those goods being to sit upon, that being, so it was said, a function performed in the household.
With respect to this approach, I do not think it is necessary, or desirable, to separate out the two separate questions as submitted. Rather, I think the proper approach is to ask, in respect of the goods in question, whether they are of a kind ordinarily used for household purposes. This approach requires consideration of each of the particular chairs in question. Of some of them the question may readily be answered in the negative. A high back executive office chair is clearly not a chair of a kind ordinarily used for household purposes. Rather, it is of a kind ordinarily used for office purposes. The question, however, becomes more complicated with smaller chairs of a kind which may, on the one hand, be used in an office and on the other hand, are, in accordance with the evidence, sold by retail outlets such as Ikea, Freedom Furniture and Harvey Norman for what are clearly household purposes. The onus lies upon the appellant to show, in respect of each of the items of goods, that they are of a kind ordinarily used for household purposes. I should say that chairs sold by Ikea or Freedom Furniture and some of the chairs sold by Diethelm are clearly of the same kind, notwithstanding that they may be differently constructed, that one may be constructed in Australia and one overseas, or that one may be upholstered in a better fabric than the other, or have better spring work than the other. The same sales tax consequences must apply where the goods are the same class of goods, notwithstanding
ATC 2402
that the destination of each of the actual goods under consideration may be to a different market.''
(g) Hill J referred to the decision of Olney J in the Sherwood Overseas case; see in this context following passage (at ATC 4719; ATR 483-17; FCR 471):
``Reference was made to the decision of Olney J in FC of T v Sherwood Overseas Pty Ltd 85 ATC 4267; (1985) 75 FLR 474 and to the decision of Yeldham J in Kentucky Fried Chicken Pty Ltd v FC of T 86 ATC 4701, affirmed by the Court of Appeal of New South Wales sub nom FC of T v Kentucky Fried Chicken Pty Ltd 88 ATC 4363; (1988) 12 NSWLR 643. Neither of these cases is of great assistance. In Sherwood Overseas, the issue was whether a device for cleaning swimming pools known as the `Kreepy Krauly' fell within the Item. His Honour held that the device in question was a `cleaning appliance' (see para (g) of the Item) ordinarily used for household purposes. Much of the argument appears to have been placed upon the question of the narrowness of the expression `household' and its relation to a domestic swimming pool. That is not an issue of concern in the present case. In the course of his judgment his Honour, however, said (at ATC 4271; FLR 478-479):
`The use of the adjective ``household'' suggests that the intention has been to distinguish the particular goods in question from similar goods that have uses outside a domestic establishment. I have already made reference to commercial and industrial uses to which goods of a similar description can be put and I think that in broad terms this is the intention of using the words ``ordinarily used for household purposes''.'
It having been conceded that Kreepy Kraulys were goods of a kind ordinarily used for domestic swimming pools, that concession sufficed to bring the goods within the relevant Item in the Third Schedule.''
(h) The judgment of Olney J in Sherwood Overseas was cited in both Diethelm and Chubb and was not disapproved. Mr McGovern, indeed, argued that Olney J was prescient to some extent in that Diethelm's case was concerned with chairs which are capable of use both in a home and in an office.
(i) Mr McGovern referred also to the decision of Davies J in OR Cormack's case at ATC 4124-4125; ATR 155:
``The expression `brushes of a kind ordinarily used for household purposes' does not immediately bring to mind paint brushes. Therefore, it is significant that the many individual paragraphs in Item 1 do not include a category for tools such as gardening, carpentry, painting, plumbing tools and the like. Most households would possess and use tools to some extent.
Tools may have been omitted because the legislature recognised the difficulty that there would be in deciding what tools were ordinarily used for household purposes. That description is not well suited to distinguishing between tools which may be used both for trade and for household purposes. Items such as a hammer or an axe may be used as readily in a household or in trade or in industry or on a farm. No doubt some tools are not trade quality. But many good quality tools have no characteristic which particularly distinguishes them for trade or household purposes. Indeed, the evidence in the present case does not provide any factor which clearly differentiates for the purposes of Item 1 between one paint brush and another. Evidence as to what may be sold by Big W or what BBC Hardware sells to the `do-it- yourself' trade is hardly sufficient.
Mr O.R.Cormack gave evidence as to which of the goods were suitable for use by professional painters. However, although it may be difficult to classify within the expression `goods of a kind ordinarily used for household purposes' goods which are usually used in and have been designed for use in trade, such goods may often be used for household purposes. Thus, all the goods with which we are concerned would be possessed by many households. Many households would use and possess best quality paint brushes. And, likewise, the use of the cheaper brushes, such as the Aussie brush, would not be confined to households. The smaller, cheaper brushes could be used for many purposes, and though not manufactured for use by the painting trade,
ATC 2403
would have many applications in business and trade concerns.It is usual for households to possess and use tools for gardening, carpentry, plumbing, painting or like purposes. The fact that such goods may be ordinarily kept in a garage or shed rather than in a house itself would not preclude them from being household goods. The concept of a household encompasses the ordinary household environs. But these items are not mentioned in Item 1, although so many other items are specified in detail, eg `cutlery and cutlery sharpeners' and `incinerators, compost bins, garbage cans'. It seems to me that the failure to specify `tools' shows that Parliament intended that generally they not be included within the Item. Tools form such a unified category that one would expect that, if Parliament had intended to comprehend them, it would have said so. There is no paragraph which brings tools to mind.''
(j) And in Diethelm at first instance (Diethelm v FC of T 92 ATC 4762), Davies J noted that it is necessary to construe the relevant words in accordance with ordinary parlance and not on a scientific basis and to consider their essential character. It is necessary, so he said, to approach the words in a straightforward way and without moving from word to word.
109. Mr McGovern drew my attention to the content of the Second Reading Speech by Sir Arthur Fadden (Exhibit R2) which refers in its terms to domestic goods, and contended that it indicated a legislative intent to distinguish between domestic and non-domestic goods, and on the basis that the disputed machines could not be categorised as domestic.
110. Again, in the context of ``essential character'', Mr McGovern referred me to the decision of Wilcox J in
Neil Pearson & Co Pty Ltd v Collector of Customs (1990) 21 ALD 62. That case was concerned with the question of whether certain Maytag machines were, for the purposes of the Customs Tariff Act 1982, machines of a kind used for domestic purposes.
Headnotes (i) and (ii) of that decision read as follows:
``(i) The essential character of the goods must be classified by determining their state or condition at the time of importation rather than the purpose of the importer or purchaser.
Blackwood Hodge (Australia) Pty Ltd v Collector of Customs (1980) 3 ALD 38; 47 FLR 131;
Chinese Food & Wine Supplies Pty Ltd v Collector of Customs (1987) 12 ALD 313; 72 ALR 591;
Times Consultants Pty Ltd v Collector of Customs (1987) 76 ALR 313, applied.(ii) Given the state or condition of the machines at the time of importation, their principal or predominant use was for non- domestic purposes, sub-item 84.40.2 of Schedule 3 to the 1982 Act therefore being applicable.''
And Wilcox J said (at 66):
``The principle referred to in these authorities applies to the present case. In determining whether the Maytag washing machines fell within sub-item 84.40.1, the Tribunal was not concerned with the subjective intentions of either the exporter or the importer. Section 269C of the Customs Act is not relevant. That section is concerned with the making of TCOs to mitigate the effects of the application of the schedules to the Customs Tariff Act where there is no relevant Australian industry to be protected. It is understandable that, when considering whether a TCO should be made, the Comptroller-General should be required to consider the actual use within Australia of particular goods. That is a matter quite different to the proper classification of the goods. The task of the Tribunal was to look at the machines and determine their nature and the purpose for which they are designed and constructed. If the machines could properly be described as being `of a kind used' for domestic purposes, they fell within the sub-item; otherwise, they did not. The matter was complicated by the fact that the machines were suitable for use for both domestic and non-domestic purposes; but they had to be put into one category or another. As I have already mentioned, Mr Bannon took the view that it was enough that the machines were commonly or customarily used for domestic purposes, even though this might have been the use of only a minor proportion of all the machines.
With respect, it seems to me that Mr Bannon's approach is at odds with the
ATC 2404
majority view in Chandler & Co. Although the relevant item in that case was more cryptically expressed than is sub-item 84.40.1, the essential question was the same. The Collector had to determine the purpose of use of the relevant goods. As in the present case, the evidence indicated that a proportion of the goods would be used for a purpose which fell into an item in the schedule, another proportion would be for a use which fell outside that item. The High Court resolved the dilemma of classification by saying that the relevant use was the principal or predominant use. That approach is inconsistent with Mr Bannon's view that a common or customary use is sufficient.Although Mr Bannon did not make a specific finding that the principal or predominant use of the Maytag washing machines was for non-domestic purposes, the extracts from his reasons for decision which I have set out above sufficiently indicate that this was his view. Accordingly, as it seems to me, he should have concluded that sub-item 84.40.1 was inapplicable to the relevant machines.''
The Tribunal agrees with the Applicant's Reply that the difficulty of construction which arose in Neil Pearson does not arise in this matter. The concessional rate applies where the goods are ordinarily, commonly or customarily used for household purposes. The decision in Neil Pearson is clearly distinguishable.
Part H - The Tribunal's views as to ``essential character'' and other relevant legal aspects
111. (a) The Tribunal has carefully considered Mr McGovern's arguments as to the ``essential character'' test. While it may not have been expressly disavowed in precise words, its continued relevance must be doubtful. See in particular Burchett J in Chubb (referred to in clause 43 supra) which might be construed as a rejection of the test; Hill J in the same case expressed some doubt as to its efficacy; he thought (and see ATC 4718; ATR 482-22; FCR 470) that there are cases where ``the search for the essential character of an item may be useful in determining whether particular goods constitute advertising matter or a catalogue'' but that ``in other cases the phrase `essential character' may be thought itself to suffer some lack of precision''. I respectfully agree with the view of Hill J that these words lack precision.
(b) The Respondent contends that there are features in respect of the commercial machines which give them an essential character which puts them into a genus different from that of goods of a kind ordinarily used for household purposes. Those features are set out in clause 18 of the Applicant's Reply in the following terms:
``18 The Respondent also says that the disputed laundry equipment has different styled switches or knobs on its control panels; more robust controls; fewer cycles options; and is sold with a longer warranty; is heavier; stronger; more durable; more expensive; and larger, and is not usually sold by the same, or the same kind of, retailers who sell other brands and types of laundry equipment more usually installed in the private laundry facilities of the residences of individual households.''
(c) In Diethelm, Hill J (with whom Whitlam J agreed) said (at ATC 4718-4719; ATR 482-10; FCR 470):
``Because sales tax is a tax ordinarily imposed upon the last wholesale sale in the course of the flow of commerce between manufacture (or importation) and consumption, it may be said that generally the task of classification to determine whether particular goods fall within a particular Item is one which looks at the essential character of the goods themselves rather than the purpose of the purchaser or the proposed destination of the goods in the mind of the manufacturer or importer: DFC of T v Lincoln Industrial Cleaners Pty Ltd 75 ATC 4208; (1975) 5 ATR 558; 7 ALR 118. The reason why the Court is impelled to search for objective criteria to be found within the goods themselves, rather than the subjective purpose, is discussed by Griffith CJ and Barton J in their dissenting judgments in Chandler & Co v The Collector of Customs (1907) 4 CLR 1719...
Phrases such as `essential character' have sometimes been used to express this search for objective criteria, as is illustrated by the judgment of French J which I have had the privilege of reading. And there may be cases where the search for the essential character of an item may be useful in determining whether particular goods constitute advertising matter or a catalogue: cf Thomson Australia Holdings Pty Ltd v FC of T 88 ATC 4916; (1988) 20 FCR 85; 19 ATR
ATC 2405
1896. In other cases the phrase `essential character' may be thought itself to suffer some lack of precision.In each case, however, the precise language of the item must be borne in mind. If the item, as here, calls for a determination of whether the goods themselves are of a particular kind, that issue must, no doubt, be determined objectively but, with respect to what French J has said, is little assisted by a consideration of the particular `realities of their manufacture and sale'.
Once it is appreciated that the question for issue is concerned with the kind of goods in question rather than the actual goods, it is clear that evidence such as was given in the case as to the market into which the actual goods are sold will be of little relevance. The fact that a high proportion of the chairs in question were brought for office use would tell little as to the use of the kind of goods, the genus, of which the particular goods in question form a part. Similarly, it seems to me that a finding that the goods are of high quality making them too expensive for general sale for use in households will be of little or no assistance. This will be particularly so if the class of goods in question is capable of encompassing goods of high quality as well as goods of lesser quality.''
And Hill J said (at ATC 4720; ATR 484-5; FCR 472):
``... I think the proper approach is to ask, in respect of the goods in question, whether they are of a kind ordinarily used for household purposes. This approach requires a consideration of each of the particular chairs in question.... The onus lies upon the appellant to show, in respect of each of the items of goods, that they are of a kind ordinarily used for household purposes. I should say that chairs sold by Ikea or Freedom Furniture and some of the chairs sold by Diethelm are clearly of the same kind, notwithstanding that they may be differently constructed, that one may be constructed in Australia and one overseas, or that one may be upholstered in a better fabric than the other, or have better spring work than the other. The same sales tax consequences must apply where the goods are the same class of goods, notwithstanding that the destination of each of the actual goods under consideration may be to a different market.''
(d) As I understand the approach of Hill J in Diethelm, a determination of essential character may be useful in a case where the question is as to whether the goods are eg a ``newspaper'' or a ``catalogue''. But that will not invariably be the correct approach, and it is not, in the view of the Tribunal, the correct approach in determining a classification under an Item such as that which is relevant in this matter.
(e) Similarly in Chubb, Hill J (with whom Tamberlin J agreed) applied Diethelm. He said at (ATC 4194-4195; ATR 295-4; FCR 569):
``In delivering a judgment with which Whitlam J agreed, I pointed out that the question to be determined was not whether the particular goods before the Court were ordinarily used for domestic purposes, but rather whether the goods themselves were of a particular kind ordinarily used for household purposes. I emphasised the need to bear in mind the language of the Item.
... I stated the approach to be adopted in the following passage (at ATC 4720; FCR 472):
`... I think the proper approach is to ask, in respect of the goods in question whether they are of a kind ordinarily used for household purposes. This approach requires consideration of each of the particular chairs in question.'''
And Hill J said at (ATC 4195; ATR 295-28; FCR 569):
``French J delivered a separate judgment emphasising the objective nature of classification and the need to find `the essential character' of particular items. In his Honour's view the essential character of the chairs in question was that they were office furniture, a characterisation which reflected the market in which the chairs were manufactured and sold and, accordingly, the chairs were not of a kind ordinarily used for household purposes.''
(f) The fact that Hill, Burchett, Whitlam and Tamberlin JJ in Diethelm and Chubb did not, in so many words, disapprove of the ``essential character'' approach of French J in Diethelm does not, in my view, mean that it must in consequence be taken to have been approved by them. The ``essential character'' test may have some residual relevance but not in a case such
ATC 2406
as this where it is necessary to consider the meaning to be attributed to the words ``goods of a kind ordinarily used for household purposes''.(g) My view in this regard is reinforced by the fact that the approach of French J has not been adopted by the Court in later decisions. Rather, the reasons of the majority in Diethelm and of the whole court in Chubb have been considered and applied (see eg K-Mart Australia Limited at ATC 4159; ATR 529-0;
Airovent Pty Ltd v FC of T 98 ATC 4800; (1998) 39 ATR 293; Woolworths).
(h) In Airovent, the Federal Court considered the proper construction of the words ``equipment of a kind ordinarily used...'' in the context of a sales tax exemption Item. Sackville J approved and followed the reasons of Hill J (with whom Whitlam J had agreed) in Diethelm, and Hill J (with whom Tamberlin J had agreed) and Burchett J in Chubb. His Honour did not refer to the reasons of French J on the point.
(i) It is noted that it is persuasive (as the Applicant contends) that Sales Tax Ruling SST 11 rejects the ``essential character'' test.
(j) The Respondent has contended that the use (a concurrent use) of the commercial machines for commercial purposes precludes the grant of the concessional rate. This is not correct; see Woolworths and in particular Hely J (at ATC 4193) as follows:
``The question is to be determined at the time of the applicant's purchase of the chicken bags: CCA Beverages 95 ATC at 4884; 133 ALR at 779; 97 ATC at 4224; 143 ALR at 224. Considered at that time, the chicken bags were goods of a kind ordinarily used by a retailer as a container for take away food, and if a narrower classification were adopted having regard to the printing on the bags, as a container for take away chicken: cf Diethelm at ATC 4719; FCR 471. But, as Hygienic Lily Ltd v DFC of T 87 ATC 4327; (1987) 13 FCR 396 illustrates, the fact that goods are used for commercial purposes does not, or does not necessarily, preclude them being of a kind ordinarily used for household purposes: Hygienic Lily at ATC 4330 and 4332; FCR 400 and 402.''
112. (a) Mention was made during the hearing of an article entitled ``Goods Used for Household Purposes'' by A.H. Slater QC and S. Callanan which appeared in the Australian Tax Review (December 1993).
(b) It was suggested during the hearing that that article was in some respects critical of the approach taken by Gummow J in Hygienic Lily. However a careful reading of that article indicates that it notes only that Davies J appeared to reject the approach of Gummow J, without expressly referring to it; in OR Cormack, Davies J stated (at ATC 4123-4124; ATR 154):
``Item 1 commences by expressing a general description of the class or genus of goods to which the item applies. That class or genus is `Goods... of a kind ordinarily used for household purposes'. The class is somewhat imprecise, as I shall later discuss, but the description conveys a readily understood concept. With respect to most goods, it would not be difficult to decide as a matter of fact whether they fall within or without the description. Though the following paragraphs (a) to (p) are not comprehensive of household goods, it is noticeable that all the descriptions of goods in the paragraphs readily bring to mind goods which are ordinarily used for household purposes. They impose no strain on the ordinary meaning of that genus.''
His Honour considered the issue to be one which is able to be expressed by way of a single question: ``In each case, the task is merely to determine as a matter of fact whether the goods in issue fall within the description used in Item 1.''
Part I - The Applicant's submissions on fact
113. Each of the Applicant's Outline and the Respondent's Submissions dealt comprehensively with the facts, so much so that the Tribunal intends to reproduce their respective contentions. As set out previously in these Reasons, a comparison of the two sets of contentions on the facts reveals differences, but also a degree of accord. Mr Higgins' submissions are contained in the Applicant's Outline (Exhibit A8); clauses 141 to 204 are as follows:
``141 It is submitted that the evidence establishes the following relevant facts.
142 The Applicant sold by wholesale coin- op and non coin-op Speed Queen, Maytag and Primus washing machines and driers and parts therefor throughout every
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Australian state and territory (except Western Australia). (Exh. A1 paras. 7 to 18). Where sales were taxable, the Applicant paid tax at the general rate. The applicant has since refunded to the Retailers tax passed on in excess of tax payable at the concessional rate. (Exh. A1 paras. 55 to 59 and PJ15)143 The Applicant ceased to distribute Speed Queen laundry equipment in l99Q and has since distributed only the Maytag and the Primus brands. (Exh. A1 paras 8 to 14)
144 The group of companies which has since distributed Speed Queen laundry equipment (` the Speed Queen Group ') has at all times been the Applicant's principal competitor. The Speed Queen Group distributes Speed Queen and Dexter brand laundry equipment. (Exh. A4 paras 6, 42 and 43, and pp 10 to 12. T 15/3/99 at p 18-11 to 18-13)
145 The Speed Queen and Maytag washing machines are all of a top-loading type. (Exhs. PJ9 and PJ9.1. Exh. A4 at pp 19 to 24 and 27 to 40.6)
146 The Speed Queen and Maytag washing machines compete directly with each other and with other brands of top-loading washing machines. (Exh A1 paras 30 to 42, 47 and 48. Exhs PJ11 and TR3. Exh. A4 at paras 10 and 12 to 40, 42 and 43, and pp 10 to 12, 19 to 24 and 27 to 40.6. Exh. A13. Exh R3 at paras. 3, 4, 7 and 8. T 15/3/99 at pp 18-13 to 19-5. T 17/3/99 p 33.3 to 33.5)
146 [a] The Speed Queen and Maytag laundry equipment is manufactured in the United States where top-loading type washing machines are almost universal. (Exh. A1 paras. 8 to 12. Exhs. PJ9 and PJ9.1. Exh A4 at pp 10 to 12, 19 to 24 and 27 to 40.6. T 15/3/99 at p 19-10 to 19-15. T 15/3/99 at p 18-17 to 18-18. T 17/3/99 at p 33.3 to 33.5)
147 The Primus washing machines are all of a front-loading type as are the Dexter washing machines distributed by the Speed Queen Group. (Exhs. PJ9 and PJ9.1, TR10 and TR11. Exh A4 at pages 41 to 44)
148 The Primus laundry equipment is manufactured in Europe where the front- loading type washing machines are almost universal. The Dexter laundry equipment is manufactured in the United States. (Exh. A1 paras. 8 to 12: Exhs. PJ9 and PJ9.1. Exh A4 at pp 41 to 44. T 15/3/99 at p 19-10 to 1915. T 15/3/99 at p 18-17 to 18-18. T 17/3/99 at p 33.3 to 33.5)
149 The Primus and Dexter washing machines compete directly with each other and with other brands of front-loading washing machines. (Exh A1 paras 30 to 42, 47 and 48. Exhs PJ11, TR10 and TR11. Exh. A4 at paras 19 to 38, 41, 42 and 43, and pp 10 to 12 and 41 to 44. Exh. A13. Exh R3 at paras. 3, 4, 7 and 8. T 15/3/99 at pp 18-13 to 19-5. T 17/3/99 p 33.3 to 33.5)
150 In Australia a majority of washing machines sold are top-loading, though a substantial minority are front loading. The difference between top and front loading washing machines is reflected in capital cost and washing efficiency though each serve the same purposes and it is submitted nothing turns upon the distinction. (Exh PJ11. T 15/3/99 at p 19-6 to 9-25)
151 All Speed Queen, Maytag and Primus driers are front-loading. (Exhs. PJ9, PJ9.1 and TR3 to TR12)
152 The laundry equipment in dispute (see Appendix 1) has dry linen weight capacities of:
- Speed Queen:6 kg and 7 kg
- Maytag:6 kg and 7 kg
- Primus:6 kg, 7 kg and 10 kg
(Exh. A1 paras 30, and pp 15 and 16. Exhs. PJ9 and PJ9.1. Exh. A4 paras 17, 42 and 43, pp 10 to 12, and 15 to 40.6)
153 In addition to the disputed laundry equipment the applicant sells laundry equipment with dry linen weight capacities in the range of 16 kg to 55 kg (` commercial/industrial laundry equip- ment '). (Exh. A1 paras 45 and 46. Exh. A3 para 9. Exh. A9 para 2 and p 3. T 16/3/99 at pp 2-19 to 3-10 and 57-17 to 57-29. T 17/3/99 at pp 4.3 to 4.7, 22.6 to 24.2)
154 Similarly, the Speed Queen Group distributes commercial/industrial laundry equipment with dry linen weight capacities in the range 15 kgs to 30 kgs. (T 17/3/99 at pp 33.5 to 34.3)
ATC 2408
155 The commercial/industrial laundry equipment is more complex in its controls and is adapted for use by experienced attendants in commercial laundries. It may be programmed with a range of cycles for use in conjunction with specialised treatment agents specific to the particular fabrics and/or soiling. Examples include nursing homes, hotel and restaurant linen. (Exh. A1 paras. 45 and 46. T 16/3/99 at pp 2-19 to 3-10. T 17/3/99 at pp 4.2 to 4.5 and 33.5 to 34.4)
156 The commercial/industrial laundry equipment may also be installed in laundromats for use by the proprietor for contract laundering such as restaurant linen. Where so installed its activation is never, or virtually never, controlled by any coin- operated device and it is never, or virtually never, directly used by laundromat customers. (Exh. A1 paras 45 and 46. T 16/3/99 at pp 2-19 to 3-10. T 17/3/99 at pp 4.3 to 4.8, 22.9 to 23.4 and 33.5 to 34.4)
157 The circumstances of use of the commercial/industrial laundry equipment in a laundromat are distinguished from the use of goods of the same kind as the disputed laundry equipment. Where installed in a laundromat, the disputed laundry equipment is always or virtually always installed for direct use by laundromat customers for laundering clothes of members of their respective households and their other household linen. (Exh. A1 paras 45 and 46. T 16/3/99 at pp 2-19 to 3-10. T 17/3/99 at pp 4.3 to 4.8, 22.9 to 23.4 and 33.5 to 34.4)
158 The disputed Speed Queen, Maytag and Primus laundry equipment has a security housing incorporated into the control panel. The security housing has installed in it the activating mechanism which may be non coin operated or coin operated. The security housing is locked with a security key. (Exhs. PJ9 and PJ9.1. TR4 to TR12. T 15/3/99 at pp 12-5 to 12-9, 25-28 to 26-11. T 16/3/99 at pp 19-31 to 19-33 and 20-9 to 20-15. T 17/3/99 at p 17.3 to 17.5)
159 The Speed Queen and Maytag laundry equipment may have installed in the security housing either a coin-operated activating mechanism or a sturdy push-button (referred to in the trade as a `push bar') activating mechanism. (Exh. A1 at paras 23 to 25. T 15/3/99 at pp 24-7 to 24-14)
160 The security housing in the control panel of the Primus laundry equipment may be installed with either a coin-operated activating mechanism or a sturdy push- switch activating mechanism. (Exh. A1 at paras 23 to 25 and pp 15 and 16. T 15/3/99 at pp 25-5 to 27-7, 25-17 to 25-24, 27-28 to 28-3 and 50-5 to 50-16)
161 In any case, where a coin-operated activating mechanism is installed in the security housing, a separate locked coin box is also installed. (Exhs. PJ9 and PJ9.1. T 15/3/99 at pp 80-2 to 80-20. T 16/3/99 at pp 20-9 to 21-15 and 24-8 to 24-19)
162 For any one model of the disputed laundry equipment, a coin operated activating mechanism may be replaced with a non coin-op activating mechanism and vice versa (Exh A1 at paras 22 to 24 and pp 15 and 16. T 15/3/99 at p 25-20 to 25-24). Replacement takes about 3 to 5 minutes. It requires the owner's security key to open the security housing to gain access to the bolt and two electrical terminals which secure and connect the activating mechanism. Replacement is frequently performed by the owner. (T 15/3/99 at pp 25-28 to 26-11, 27-28 to 28-3, 53-23 to 54-12 and 79-33 to 80-1)
163 The disputed laundry equipment, and laundry equipment of competitive brands, is commonly installed in the shared laundry facilities of various kinds of premises providing residential accommodation. It is INSTALLED for use directly by residents in laundering the clothes (and other household linen) of members of their respective households. (Exh. A1 at paras 32 to 36 and 48. Exhs PJ9 and PJ9.1. Exh. A3 at paras 11 and 12. Exhs. TR3 to TR9. Exh. A4 at paras. 19 to 25. T 15/3/99 at pp 12-20 to 13-19, 17-4 to 17-29, 22-1 to 22-26. T 16/3/99 at p 34-12 to 35-29. T 17/3/99 at p 32.2 to 32.8)
164 The disputed laundry equipment and laundry equipment of competitive brands installed in such residential premises may have coin-operated or non coin-operated activating mechanisms. (Exh. A1 at paras 34 and 35, and pp 15 and 16. Exh. PJ9 and PJ9.1. Exh. A3 at paras 11 to 18. Exhs. TR3 to TR9. Exh. A4 at paras 10 and 21 to 24,
ATC 2409
and pp 15 to 44. T 15/3/99 at p 22-1 to 22-26. T 16/3/99 at p 10-31 to 11-29. T 17/3/99 at p 26.0 to 26.3 and 31.2 to 32.6)165 Where allocation of cost according to use as between residents or as between residents and the proprietor is a requirement, the laundry equipment usually installed in shared laundry facilities of residential premises has a coin-operated activating mechanism (Exh. A1 at para 35. Exh. A3 at para 12. Exh TR3 to TR9. Exh. A4 at paras 8, 19 to 23 and 38 to 41 and pp76 to 81. T 17/3/99 at pp 29.7 to 29.9)
166 More than 90% of shared laundry facilities in home unit buildings are installed with coin-op laundry equipment, whether of the brands marketed by the Applicant or of other brands. (T 16/3/99 11-19 to 11-29). By way of example it is the evidence that the Speed Queen Group alone has installed approximately 100 coin operated Speed Queen brand washers and dryers in the shared laundry facilities of residential flat buildings owned by the Commonwealth Department of Housing in the Australian Capital Territory. (Exh. A4 at para.22 and pp 76 to 81)
167 Where allocation of cost as between residents is a requirement, laundry equipment not fitted with coin-op activation mechanisms is also commonly installed in the shared laundry facilities of residential premises. In such cases, use and allocation of cost is controlled by other means. Some shared laundries in residential flat buildings have lockable power points connected to each unit's metered power supply. In other cases separate coin-operated prepayment meters control the power supply. Meters may be attached to the laundry equipment itself, or secured to a nearby fixture. (Exh. A1 at para. 35. Exh. A3 at para 12. Exh. TR3. Exh. A4 at paras. 22 and 23. T15/3/99 at pp 11-4 to 11-28. T 17/3/99 at pp 24.3 to 24.9 and 30.0 to 30.9)
168 Non-coin op laundry equipment of other brands sold by retail department stores and other appliance retailers is also commonly installed in the shared laundry facilities of residential premises in competition with the Applicant's non-coin op laundry equipment. (The model numbers of the Applicants non coin op laundry equipment are listed at columns [4], [5] and [6] in the tables at Appendix 1.) (Exh. A1 at para 48. Exh. A3 at para 12. Exh. TR3. Exh. A4 at paras 42 and 43 and pp 23 to 30. Exhs. Al l, A12 and A13. T15/3/99 at pp 10-29 to 11-3, 17-4 to 17-29. T 16/3/99 at pp 34-8 to 35-29 and 52-10 to 53-18. T 17/3/99 at p 31.2 to 31.5)
169 Where cost sharing as between residents is not a requirement, the Speed Queen, Maytag or Primus laundry equipment installed may be fitted with a push-bar or push-switch type activating mechanism or may have a heavy duty or standard control panel. Equally, non coin operated equipment of other brands might be installed. (Exh. A1 at para. 34. Exh PJ9, PJ 9.1 and PJ11. Exh. A4 at paras. 24 and 43 and at pp 23 to 30. T 15/3/99 at pp 10-29 to 11-3, 12-11 to 12-19, 13-11 to 13-19, 16-1 to 16-2, 17-20 to 17-29, 22-21 to 22-26 and 68-22 to 68-26. T 16/3/99 at pp 10-35 to 11-26. T 17/3/99 at p 17.2 to 17.3)
170 Each of the other Speed Queen Maytag and Primus models which appear on the same line in the tables at Appendix 1 (including the disputed laundry equipment) are identical in all material respects save only as to the type of activating mechanism and style of control panel. (Exh. A1 at para 28)
171 Laundry equipment installed in the shared laundry facilities of residential accommodation may be financed in a number of ways. The occupier might purchase or rent. Or the occupier might make an agreement with a so called `route business' under which the route business installs the laundry equipment in the occupier's premises under a license under which the occupier receives a percentage of the takings though the machine. A route business would never or virtually never install non-coin-op laundry equipment. (Exh. A1 at paras. 21 and 53. Exh. A4 at paras. 8 and 9. T 15/13/99 at pp 44-5 to 45-20 and 58-16 to 58-30. T 16/3/99 at pp 34-1 to 34-17, 35-13 to 35-29 and 46-25 to 46-26)
172 Regardless of the means of financing, and whether or not coin operated, the disputed laundry equipment and laundry equipment of competitive brands is installed in the shared laundry facilities of residential
ATC 2410
premises for use and is used directly by residents in laundering the clothes (and other household linen) of members of their respective households. (Exh. A1 at paras 32 to 44 and 47 to 49. Exhs. PJ9 and PJ 9.1. Exh A4 at paras 19 to 25, 35, 42 and 43 and pp 10 to 12 and 15 to 44)173 The Tribunal viewed and saw a demonstration of coin-op Maytag washing machines and dryers installed in the shared laundry facilities of a city building. It comprised approximately 30 floors of residential apartments and 15 floors of hotel accommodation. The laundry equipment installed was for the direct use of apartment residents and hotel guests.
174 The disputed laundry equipment and other brands of coin-op and non coin-op laundry equipment is also installed in laundromats for direct use by customers of laundromat businesses in laundering the clothes (and other household linen) of members of their respective households. (Exh. A1 at paras 38 to 43. Exh. PJ12 Buying a Laundrette? at pp 1 to 4. Exh. A3 at paras 19 to 24. Exhs. TR10 to TR12. Exh. A4 at paras 27 to 41. T 15/3/99 at pp 80-25 to 81-3. T 16/3/99 at pp 58-18 to 59-8)
175 Approximately 70% to 85% of all laundromats around Australia (not including Western Australia about which there was no evidence) are equipped exclusively with coin-op laundry equipment for direct use by customers. (Exh. A1 at para 40. Exh. A3 at para 19. Exh. TR10. Exh A4 at para 28)
176 Approximately 10% to 20% of all laundromats are equipped with a mixture of coin-op and non coin-op laundry equipment. (Exh. A1 at para 40. Exh. A3 at paras 21 and 22. Exh. TR11. Exh. A4 at para 29)
177 10% or less of all laundromats are equipped exclusively with non coin-op laundry equipment. (Exh. A1 at para 40. Exh. A3 at paras 23 and 24. Exh. TR12. Exh. A4 at para 30)
178 During opening hours, a majority of laundromats throughout Australia (not including Western Australia about which there is no evidence) are not attended by any person acting for or on behalf of the proprietor, except to open, close or maintain premises or service or repair equipment. Of the remainder, some are attended during part only of opening hours, and some are attended full-time. (Exh. PJ12 Buying a Laundrette? at pp 1 to 4. Exh. A4 at para 28. Statement of Peter Melville Jay sworn 18 April 1999, paras 3 to 6. T 16/3/99 at pp 56-23 to 57-16. T 17/3/99 at p 16.0 to 16.1)
179 Where non coin-op laundry equipment is installed in a laundromat, customers usually pay an attendant cashier, though in some cases laundry equipment may be controlled by prepayment meter. (Exh A1 at paras 42 and 43. Exhs PJ12 and PJ13. Exh A3 at paras 19 to 24. Exh TR11 and TR12. Exh A4 at paras 32 and 33. T 15/3/99 at pp 80-21 to 81-3. T16/3/99 at pp 10-6 to 10-8 and 58-21 to 59-8)
180 Non coin-op laundry equipment of other brands, usually sold by retail department stores and other appliance retailers for use by single users, is also be [sic] installed in laundromats in competition with the disputed laundry equipment. (Exh A1 at para 48. Exh. PJ9 and 9.1. Exh A4 at paras 29, 30, 42 and 43, and pp 10 to 12. T 17/3/99 pp 22.1 to 22.3)
181 Whether coin-operated or non coin- operated, the exigencies of direct use by multiple users for the purposes of their respective households make it preferable that laundry equipment installed in the shared laundry facilities of residential accommodation and in laundromats be of superior durability. (T 15/3/99 at p 16-9 to 16-28: T 17/3/99 at pp 16.6 to 16.7, 17.2 to 17.4, 18.1 to 18.5, and 31.2 to 31.8)
182 There was also evidence about the Kleenmaid brand of laundry equipment. It is sold by the Kleenmaid chain of appliance retailers usually for installation for use by single households. Kleenmaid laundry equipment is `badge engineered' Speed Queen laundry equipment - both are produced by the same manufacturer. Save only for name and control panel styling, Kleenmaid laundry equipment is identical in all material respects to the corresponding non coin-op and coin operated Speed Queen models. It is sold in competition with Speed Queen, Maytag and laundry equipment of other brands. However Kleenmaid retail prices are significantly higher than the retail prices of corresponding Speed Queen,
ATC 2411
Maytag and other brands of laundry equipment. (Exh A13 p 5. Exh R3 paras 2 and 7. T 16/3/99 pp 33-11 to 33-28, 56.2 to 56.6. T 17/3/99 at pp 2.7 to 4.1, 35.9 to 36.5, 39.8 to 40.3, 51.6 to 51.9 and 56.2 to 56.5)183 The Kleenmaid chain of appliance retailers displays and sells a wide range of brands of `white goods' including Kleenmaid, Maytag, Speed Queen, and other brands of laundry equipment. They also display coin operated washing machines. Other retailers also sell non coin-op Maytag and Speed Queen laundry equipment. Other retailers do not commonly stock coin-op laundry equipment, though they do purchase such equipment from the Applicant to the order of an individual customer. Retail department stores and other white goods retailers compete directly with the Applicant to sell laundry equipment for installation for use in multiple user situations - whether in the shared laundry facilities of residential premises or laundromats. (T 15/3/99 at pp 47-9 to 47-24 and 74-8 to 74-11. T 17/3/99 pp 2.9 to 3.0, 21.9 to 22.2 and 37.9 to 38.7. Exh R3 at paras 3, 7 and 8. Exh A13)
184 The non coin-op Speed Queen, Maytag and Primus models are identical in all material respects to the corresponding coin- op models. The same is the case for the coin op and non coin op Speed Queen and Dexter brand laundry equipment sold at all relevant times by the Speed Queen Group, the Applicant's principal New South Wales competitor. The same is also the case as between the Speed Queen and the Kleenmaid laundry equipment. The only differences are of styling of the control panel and the presence or absence of a security housing depending upon whether the capacity to for [sic] a coin operated activating mechanism is required. In some cases there may be also be variation in programming options. (Exh A1 at para 28 and pp 15 and 16. Exhs PJ9, PJ 9.1 and PJ10. Exhs A11 and A12. Exh A4 at paras 13 to 18 and pp 10-12, and 15 to 44. T 16/3/99 pp 5-33 to 6-8, 6-22 to 6-25, 7-24 to 7-26, 8-1 to 8-36, 25-6 to 25-9, 29-23 to 31-7, 75-20 to 77-5. T 17/3/99 p10.8 to l0.9 and 35.9 to 36.5)
185 The disputed laundry equipment and laundry equipment of competitive brands is sold for use and is used directly by persons to launder clothes (and other household linen) of members of their respective households, whether that use is carried out in the residence of a single household, or in the shared laundry facilities of other residential accommodation, or in a laundromat. (Exh A1 paras 36, 42 and 48. Exh A4 at paras 21, 25, 33 and 43. T 15/3/99 at; pp 10-29 to 11-3, 15-31 to 16-3 and 68-22 to 68-26)
186 Use for that purpose is the only or the only material physical function for which the disputed laundry equipment and laundry equipment of competitive brands was designed manufactured marketed and sold. (Exh. A1 para 47. Exh A4 paras 35 and 36)
187 In each case the disputed laundry equipment and laundry equipment of competitive brands is used for that purpose irrespective of whether the particular laundry equipment is:
- (1) fitted with a coin operated or non coin operated activating mechanism;
- (2) fitted with a more or less robust control panel;
- (3) more or less complex in its controls;
- (4) capable of performing more or less variety of cycles;
- (5) more or less heavily constructed;
- (6) more or less durable;
- (7) sold with more or less warranty period;
- (8) more or less expensive;
- (9) marketed under descriptions more or less reliant upon invoking qualities such as `homestyle'; `commercial/homestyle'; `heavy duty'; `commercial'; `com- mercial/industrial'; `industrial';
- (10) more usually installed for use by a single household or is more usually installed for use by multiple households;
- (11) more usually sold by retailers which might be described as `department stores', or more usually sold by other types of retailers.
188 Competitive brands of laundry equipment (including but not limited to Whirlpool and Kleenmaid) include models of similar weight, durability and warranty terms, and have retail prices comparable to
ATC 2412
or higher or lower than prices for Speed Queen and Maytag laundry equipment. (Exh A13. T 15/3/99 at pp 15-28 to 15-31, 48-3 to 48-6 and 76-2 76-12. T 17/3/99 at pages 39.1 to 39.5 and 40.1 to 40.4)189 Top-loading Maytag laundry equipment competes directly with Speed Queen laundry equipment and with top-loading laundry equipment of other brands. Front-loading Primus laundry equipment of 6 kg, 7kg and 10 kg nominal dry linen weight capacity compete directly with Dexter laundry equipment of 8kg and 11 kg nominal dry linen weight capacity and with front-loading laundry equipment of other brands. (Exh A1 paras 48 and 49. Exh PJ11. Exh. R3 para 3. Exh. A4 paras 42 and 43 and pp 10, 11 and 12. T 15/3/99 at pp 68-22 to 68-26 and 76-6 to 76-12. T 16/3/99 at pp 34-18 to 35-20)
190 Maytag, Primus, Speed Queen and Dexter brands share the substantial part of the market for superior quality coin-op and non coin-op laundry equipment for direct use by multiple users whether in the shared laundry facilities of residential premises or in laundromats. (Exh A4 paras 42 and 43)
191 The evidence as to the types of premises in which the disputed laundry equipment was installed during the 3 months ended 30 June 1990, and the years ended 30 June 1995 and 1997 is summarised as follows: (See Exh A1 pages 35 and 40 to 42: Exh A8 page 3)
...
192 The evidence summarised at para. 191 above establishes that the substantial majority of virtually every model of the disputed laundry equipment was installed by the Applicant's retailer in the shared the laundry facilities of residential premises for use directly by residents in laundering clothes (and other household linen) of members of their respective households.
193 Of the remainder, a substantial proportion of virtually every model was installed in the shared laundry facilities of such residential premises by route businesses for use directly by residents in laundering clothes (and other household linen) of members of their respective households.
194 The balance was installed in laundromats for use directly by laundromat customers in laundering clothes (and other household linen) of members of their respective households.
195 Of the laundry equipment sold by the Speed Queen Group, the Applicant's principal competitor, approximately 80% of all coin-op Speed Queen and 20% of all coin-op Dexter laundry equipment is installed in the shared laundry facilities of residential premises of various kinds for use directly by residents in laundering clothes (and other household linen) of members of their respective households. The balance of coin op Speed Queen and coin op Dexter laundry equipment is installed in laundromats for use directly by laundromat customers in laundering clothes (and other household linen) of members of their respective households. (Exh A4 at paras 8, 19 to 25, 32, 33 and 38 to 41. T 17/3/99 at pp 32.7 to 33.3)
SUBMISSIONS IN CONCLUSION
196 It is submitted that the laundering by persons of clothes and other linen of their respective households serves a common or usual household purpose.
197 It is further submitted that where persons use directly the laundry equipment installed in shared laundry facilities of residential premises, or in laundromats, to launder clothes (and other household linen) of members of their respective households, they serve a common or usual household purpose by so doing.
198 It is further submitted that the evidence establishes the fact that the disputed laundry equipment is ordinarily, usually or commonly used by persons directly for the purpose of laundering clothes (and other household linen) of members of their respective households.
199 It is also submitted that whether that laundry equipment so used is activated by coin-operated or non coin-operated activating mechanisms has no bearing upon the fact that the laundry equipment is used directly by those persons for a common or usual household purpose. Further it is submitted that that substantive purpose is unaffected by whether the cost to activate
ATC 2413
the laundry equipment is set by the occupier so as to return a profit; or to recoup cost; or to recoup some other amount.200 It is further submitted that where coin op laundry equipment is so used, it is no more relevant that the occupier might concurrently recover a profit, or cost, or some part of cost, or that a route business operator might recover a profit, than it is relevant that a financier might recover interest under a financing transaction which funded the installation of the equipment, or that a utility selling water or electricity or gas would concurrently sell those commodities intending to recover costs or costs and profit. For the purposes of the preamble to Item 1 such concurrent uses are irrelevant.
201 In the present case, it is submitted that for the purposes of the preamble to Item 1, the relevant use is the direct use of the laundry equipment by persons in laundering the clothes (and other household linen) of members of their respective households. It is the evidence that that is the substantive purpose for which the disputed laundry equipment and laundry equipment with which it competes directly was designed, manufactured, marketed, sold and installed for use.
202 Accordingly it is submitted that the disputed laundry equipment belongs to a kind or class or genus of goods ordinarily used directly by persons in laundering the clothes (and other household linen) of members of their respective households, such use serving a common or usual household purpose and that the disputed laundry equipment is therefore goods of a kind ordinarily used for household purposes within the meaning of the preamble to Item 1.
203 Further and in the alternative it is also submitted that the coin-op and non coin-op laundry equipment installed in shared laundry facilities of residential premises and in laundromats for use by multiple users is of the same kind as the non coin-op laundry equipment more usually installed in dwellings for use by a single user. The evidence establishes the fact that in many cases it is identical in all material respects.
204 It is also submitted that the evidence as to use of laundry equipment of 15 kg dry linen weight capacity and above establishes that it is not ordinarily used directly by persons to launder clothes and linen of their respective households, nor does it belong to a kind of goods ordinarily so used. Accordingly, such laundry equipment does not belong to the same kind or class or genus of goods to which the disputed laundry equipment belongs.''
Part J - Respondent's submissions on fact
114. Mr McGovern dealt with the facts in his Submission (Exhibit R6) in clauses 3-13 inclusive as follows:
``3. In 1990 the applicant Clean Investments Pty Limited began carrying on business as a wholesale distributor of certain brands of washing machines and dryers sold under the brand name Speed Queen, Primus and Maytag (Peter Jay first witness statement paragraph 8). The distributorship in respect of Speed Queen laundry equipment continued only until the end of 1990 (Peter Jay first witness statement paragraph 9) but the applicant continued to wholesale the other brands on a continuous basis throughout the relevant period.
4. Speed Queen washing machines and dryers were imported by the applicant from the United States. During the relevant period the applicant also had a distribution agreement with the US based Maytag organisation and the European based Primus organisation. In particular the applicant was the exclusive distributor within Australia of the Primus equipment and had the sole distributorship for the commercial range of Maytag washing machines and laundry equipment throughout Australia, except for Western Australia. The distributorship for the commercial range of Maytag equipment was granted by Maytag Appliances, later Maytag Corporation. The commercial range of equipment is to be contrasted with the household/home style range of washing machines and laundry equipment sold by Maytag such equipment being generally available through recognised retail outlets such as Harvey Norman, Joyce Mayne and Bing Lee.
5. During the relevant period the applicant as wholesaler sold the washing machines
ATC 2414
and dryers to one or other of its related retail companies Richard Jay Laundry Equipment Pty Limited and Jay Laundry Rentals Pty Limited. Neither of those companies is a retailer in the same style as a Harvey Norman, Joyce Mayne or Bing Lee but sells, rents or `routes' washing machines and laundry equipment to a variety of end users, principally laundromats, routers, and, to a lesser extent, to hotels, caravan parks, women's refuges and a variety of other purchases to purchase the equipment with the view and expectation that the equipment will be used by multiple, generally unrelated users.6. Until 1996 Richard Jay Laundry Equipment Pty Limited was a retailer of laundry equipment in New South Wales, Queensland, Tasmania and Victoria. It changed its name to Richard Jay Investments in 1996. Richard Jay Distributors Pty Limited was also a purchaser of laundry equipment from Clean Investments Pty Limited until in 1996 when it changed its name to Richard Jay Laundry Equipment Pty Limited. It was until 1996 a retail distributor in South Australia and the Northern Territory before the retail distributorship for those States reverted to Clean Investments Pty Limited. Richard Jay Distributors Pty Limited, then known as Richard Jay Laundry Equipment Pty Limited also runs the Shiny Bright Laundry franchise as well as on-selling the equipment to route businesses.
7. The various models of the Maytag, Primus and Speed Queen washing machines and the Maytag dryers which are the subject of dispute are set forth in page 15 of the first witness statement of Peter Jay. It is to be noted the Commissioner has already partly allowed the objection and the machines in dispute may be categorised as all coin operated machines where the coin slide, coin dropper or programmable coin slide, together with all non-coin operated machines having a rated dry weight capacity in excess of 8kg. Thus, to revert to the table at page 15 of Mr Jay's first witness statement, only the Maytag coin operated washing machines are in dispute. Maytag washing machines of the same size as those commonly sold into single households (that is to say having a dry weight capacity of less than 8kg) provided they are not coin operated, are the subject of concession by the Commissioner. The Primus brand washing machines in dispute are all coin operated as well as all machines having a dry weight capacity in excess of 8kg. Again to revert to the table at page 15, all of the Primus washer models having a dry weight capacity of 10kg are in dispute even if those particular machines are not coin operated. The coin operated machines are automatically in dispute.
The Primus washing machines are described as industrial washer extractors in exhibits [ annexures] 7, 10 and 16 to the first witness statement of Mr Robinson. They are large commercial capacity washing machines whether push bottom or coin operated to be contrasted with an ordinary standard size washing machine having a capacity of the order of 7kg. The Primus models also have bigger motors than an ordinary standard size washing machine.
8. Ordinary domestic washing machines are exemplified by various brands such as Simpson, Hover [sic], Fisher and Paykel, GE and Whirlpool. Mr Jay acknowledged that these are top loading machines and their price may range from $800 to $1,400. On the other hand, the Maytag, Primus and Speed Queen washing machines are more robust machines and are larger, more solid and robust of construction and significantly more expensive. These machines are either retro fitted with coin operated mechanism for commercial use such as in laundromats or in route business or they have a push start or push bar mechanism which is a simplified means of starting the machines.
9. A significant feature of the commercial range of machines offered for sale by Clean Investments are that the machines have simple controls including a simple push bar for starting, three water temperatures and three wash size settings. The machines are uniquely adapted for constant use or near constant use. These heavy duty machines are suitable and appropriate for continuous duty requirements where machines will be in constant use.
10. Coin operated machines are also machines having simplified controls to ensure the easiest possible operation by a
ATC 2415
large number of users. The only difference between the coin operated and the non coin operated machines are the difference in the initiation of the washing cycle. The coin operated mechanism is easy to install and the machines as manufactured have a very elaborate housing which protects the coin slide and coin box from interference by theft or vandalism.11. Notably the ordinary domestic washing machines have a grater variety of controls which provide the user with additional flexibility in the selection of temperatures, fill levels, spin speeds and the like. This level of flexibility is not necessarily essential but in the retail market place it conveys greater convenience and added value to the user. The heavy duty machines are simplified in their controls because they are primarily sold into situations where a large number of individuals are destined to use the machines. Because of the large population of users, the machine may be in use continuously and therefore it incorporates more robust components in its desire to provide many years of trouble free service. In contrast the ordinary domestic machine is built down to a price, in the highly competitive retail environment and generally their duty requirement is relatively low, hence they are lighter in construction and they are not designed for continuous operation.
Clean Investments occasionally sells different models of standard control panel Maytag washers. As described in the evidence by Mr Peter Jay, the standard control panel is made of plastic, it is referred to as the home style type of machine and it has a variety of controls enabling various selection cycles from a more elaborate nature and variety as compared with heavy duty commercial models which are all metal and have minimal selection options.
12. It is obvious that domestic washing machines at single dwellings do not ordinarily have coin operations. A provision of equipment with coin operation is for sale into commercial laundries and other commercial settings where the machines are used by a multiple number of different users and where profit or recoupment of costs is an essential aspect of the operation of the machines. There is a `golden' end of the market, such as the four and five star hotel end of the market and a base end of the market which may be occupied by establishments such as, for example, women's refuges. Although the machines are designed for continuous use or almost continuous use, at the four or five star hotel end of the market, the machines are less likely to be used continuously.
13. The question at issue is whether, for the period prior to 1 January 1993 (`the old law') and for the period since 1 January 1993 (`the new law'), the Maytag, Primus and Speed Queen washing machines and the Maytag drying machines fall within the statutory description `goods of a kind ordinarily used for household purposes:
- i. washing machines and other appliances ordinarily used in, or in connection with, laundering clothes'.''
Part K - Conclusion
115. (a) The Tribunal accepts that on the evidence there are differences between commercial machines and domestic machines. A distinction was drawn at the level of the franchisor in the case of Maytag; Maytag licensed the Applicant to sell commercial machines; a different distributor (currently a subsidiary of Maytag) has the right to market the domestic machines.
(b) The first and obvious distinction is, of course, the use of the coin mechanism in commercial (although not all commercial) machines; this feature is not present in domestic machines. The manner in which the Respondent dealt with the objections indicates that this was an important distinguishing feature; the Respondent conceded concessional treatment to non-coin operated machines of the same type (although contending that this was no more than a concession and that there are other and relevant distinguishing features).
(c) The Respondent contends that commercial machines are heavier, more robust and more durable than domestic machines. The Applicant argued that while this is often so, it is not invariably the case. The Maytag LAT500 is equivalent in all material respects to other Maytag machines excepting only that it has a more robust control panel. And Mr Lindsay's evidence was that Kleenmaid (which was described as a badge-engineered Speed Queen)
ATC 2416
is just as strong and robust as a commercial machine.(d) The evidence indicates that commercial machines have control panels which are both more robust and yet less complex than is the case with domestic machines. This is so because commercial machines will be operated more frequently and by more users; the very fact that they will be used by multiple users requires that the operating instructions be simple and the machines durable.
(e) A further distinction is that in respect of price. There was before the Tribunal considerable and, in some respects, confusing evidence as to price differences. There was evidence as to a price differential of approximately 20%, and that a part only of that differential arises from the fact that sales tax is higher in relation to commercial machines than it is in respect of domestic machines, because the commercial machines are not afforded concessional treatment. There was evidence moreover from Mr Lindsay in particular that some Maytags sell at a price lower than that of comparable domestic Kleenmaid machines and further, that this is so also in relation to various Speed Queens. Mr Higgins referred to Exhibit A11 which is an extract (of 2 pages) from the March 1996 edition of ``Home Beautiful'' magazine; it depicts a Maytag machine with its back removed. It does not distinguish between commercial and domestic machines and simply extols the virtues of Maytag.
(f) Mr Higgins referred to evidence by Mr Robinson that there is no difference in size as between domestic and commercial machines.
(g) There was evidence before the Tribunal which would tend to indicate that warranties in respect of commercial machines are more extensive than those applicable to domestic machines.
116. Further relevant evidence consists of:
(a) Line drawings which are annexures to statements by Messrs Jay, Lindsay and Last; these line drawings do not indicate any significant difference between commercial machines and domestic machines. A Kleenmaid brochure tendered as Exhibit A13 is also relevant in this context. It states as follows:
``Kleenmaid washers are the domestic version of Speed Queen commercial washers... There's no secret to Kleenmaid's proven reputation in the laundry. We've taken the world's most popular brand of commercial washers... Speed Queen - and added everything you need for your perfect domestic wash.''
(b) Mr Robinson's evidence included pictures which depicted commercial machines side by side with domestic machines (such as Simpson brand machines) and located in the same premises.
(c) Mr Jay gave evidence that Whirlpool machines are frequently used in shared residence situations.
117. The Tribunal accepts that in applying the law:
(a) It must not construe the relevant Item narrowly.
(b) It must construe the Item and the opening words as a whole.
(c) That while it considers that it is likely that the ``essential character'' test may have been rejected, it is also conceivable that it does retain some residual relevance.
(d) That in construing the Item it is necessary to consider firstly whether the goods are within the specific words (plainly so in this case) and then to consider whether they fit the general words of the preamble.
(e) That the fact that the goods are used outside the relevant household does not preclude the application of the Item.
(f) Concurrent use does not prevent the application of the Item; (see in particular in this regard Stewart's case as to lottery tickets and in particular the judgment of Gibbs CJ at ATC 4149; CLR 390, the judgment of Brennan J at ATC 4152; CLR 395 and the judgment of Deane J at ATC 4155; CLR 401).
(g) As appears from clause 46 of these Reasons, to enquire whether households ordinarily have such articles ``would be far too narrow a view'' (Chubb's case, per Burchett J at ATC 4187; ATR 287-0; FCR 559).
118. The evidence before the Tribunal was that commercial machines have more robust but less complex control panels for the reasons set out previously; clearly commercial machines will, of necessity, be used on a more or less continuous basis by multiple users, in contrast with domestic machines owned by single families who may well use their machines only on an intermittent basis.
ATC 2417
119. Exhibit A16 indicates that a significant part of the Australian public resides in shared accommodation. It may be that this was not so at the time of the Second Reading Speech by Sir Arthur Fadden (and referred to in Exhibit R2). The Tribunal does not, in any event, think that the Second Reading Speech is of particular assistance in respect of the construction of the Item.
120. The Tribunal entirely agrees with the view expressed by Mr Higgins that the mere adaptation of a piece of laundry equipment so as to ensure that its starting mechanism is coin- operated does not deserve the importance attributed to it by the Respondent. The Tribunal is aware of the fact that gas heaters in the home (in the UK in particular) operate through the deposit of coins; Mr Higgins made mention also of coin meters for television sets in living rooms and which are (or perhaps were in the past) rented out by various rental outlets. Indeed a coin operation or mechanism might be thought perhaps to be no more than a precondition to the commencement of operation; once the machine has been activated its function is entirely independent of the starting mechanism which then becomes temporarily obsolete. By way of analogy with a contract, a condition precedent may require fulfilment for the contract to become operative, but does not then affect the nature and scope of that contract.
121. Reduced to its essentials, Mr McGovern argues that a domestic machine and a commercial machine are different; he would have it that the very fact that the commercial machine starts through a coin operation is, of itself, significant. Just as in Diethelm's case there were office chairs and domestic chairs and in Chubb there were large safes and small safes so it is, he contends, that there are washing machines (commercial) and washing machines (domestic). His argument is that they are different to an extent which removes the commercial machines from the genus or class occupied by corresponding domestic machines.
122. (a) The Tribunal considers that the appellation ``commercial'' is no more than just that, an appellation, designed to distinguish commercial machines from domestic machines. The distribution schedule is (when considered in conjunction with the box file evidence and the more detailed schedules which preceded it) of crucial importance. It indicates that the commercial machines are used to an overwhelming extent in either laundromats or shared premises. Indeed, it is precisely the coin operation which ensures that this is so.
(b) It is, in the Tribunal's opinion, decidedly odd to conceive of the use of a washing machine in shared premises as not being a household use. In a block of units, a member of the household goes to the shared laundry accommodation to use the (common) washing machine or dryer. He or she does so precisely because that particular family (or household) does not have its own and separate and private washing machine/dryer. In a caravan park or hotel residence the use is similarly a household purpose. It is to be remembered that it is not a pre-requisite of use that it occur within the household.
(c) The user of the machine at the laundromat/laundrette does so precisely because he or she does not have the same facility available at home.
123. (a) As Hill J explained in Diethelm much turns on the width of the genus. And it must not be forgotten that we are here concerned with ``goods of a kind ordinarily used for household purposes''. The commercial machines are almost invariably (a concept far more expansive than ``ordinarily'') used for a purpose which admits of no other apposite type or description (as an adjective) than ``household''. In particular, the present case and Diethelm are in my view distinguishable on the facts. The character of the furniture in Diethelm is distinguished in that it was designed, manufactured and sold for use in and was used in the offices of businesses for business purposes. It was not designed for use and, on the evidence, was not used for any, or any material, household purpose.
(b) The Tribunal, having inspected coin operated machines at the Park Regis Hotel, formed the impression that they are very much like domestic machines. Indeed, and to an undiscerning eye (and leaving aside where relevant the coin operation), there does not appear to be any significant difference. The office chairs and domestic chairs with which Diethelm's case was concerned were significantly different. And this was so (in point of size) as regards the large safes and the small safes distinguished in Chubb's case.
(c) The Tribunal does not consider that too much can or should be made of the fact that
ATC 2418
there are machines which are referred to as domestic machines and machines which are referred to as commercial machines. One might think on a prima facie view, that the different names are indicative of different kinds; the word ``commercial'' tends to indicate a profit factor or motive. But in fact, and on closer analysis, the differing words are no more than descriptive. It is of course true to say that many of the commercial machines will be operated (by laundromat owners for example) for profit. But their use by persons in laundromats who do not possess their own machines will nonetheless aptly fall within the concept of household use. The evidence before me indicated moreover that there is a degree of overlap as regards the use of the words industrial, commercial and domestic; moreover the evidence is that the commercial machines are also and to a very considerable extent used in shared premises where profit may be a factor (such as in hotels) or not a factor at all or where the payment requirements are designed simply and only to ensure equity as between users; the best example is the block of units which shares laundry facilities.(d) As set out previously in these Reasons, the important question is that of specifying the class or genus, and as Hill J said (and see the extract from Diethelm's case cited at clause 35 supra) ``the wider the genus is stated, the more likely it will be that it will be found that that class of goods is commonly used for a particular household function''. Leaving aside the 10kg machines, on the basis that they will be dealt with separately in clause 124 below, it does not seem to me that the differences between the commercial machines and the domestic machines (and there are undoubtedly differences) are such that they do not fall within the same genus. On the contrary, the manner in which the commercial machines are used and the function which they perform point, in my view, very strongly towards a conclusion that they fall within the same genus, that they do answer the description, and that they are entitled to the concessional rate. The fact that there are differences cannot be determinative; that this is so is demonstrated by the case authorities referred to earlier in these Reasons. It is hardly likely that one would find in a household (however that term is to be defined) paper cups which are embossed with a commercial name or logo; but those embossed cups remain cups (as to which see Hygienic Lily as referred to in clause 35 supra). The commercial machines, although stronger or more robust than domestic machines, and notwithstanding that there are certain other differences as referred to previously in these Reasons, fall within a genus which includes the domestic machines; they are in my view (and as set out previously), readily distinguishable from the two types of chairs in Diethelm's case and the large and small safes in Chubb's case. Insofar as this is a matter of ``impression'' and ``commonsense'', it is my view that it would not be sensible to categorise them in any different manner.
(e) I have previously in these Reasons said that I have doubts as to the continuing role which remains to be played by the essential character test, and in particular in the construction of the relevant Items. But even if that test remains relevant, I must prefer the decision of the majority in Diethelm and of the whole court in Chubb; both of those decisions are, of course, binding on me. I consider in summary that the case for the Applicant in respect of the commercial machines is very strong indeed, and accordingly the commercial machines should enjoy the benefit of the concessional rate.
124. What then of the 10kg machines?
(a) Mr Lindsay described his 7kg machines and his 10kg machines as the ``babies''.
(b) Exhibit A9 indicates the presence in the Shiny Bright Laundry in Parramatta of a coin operated 11kg machine. The same exhibit also indicates the presence in the City Laundry in Sydney of a coin operated 10kg machine.
(c) Mr Lindsay's evidence dealt with competition between Speed Queens and the Applicant's goods. At pages 9 - 10 of Exhibit A4 Mr Lindsay compared Dexter front loaders with Primus machines (also front loaders). He referred to 8kg and 11kg machines and described them as competing with W10's and W7's. That evidence can usefully be considered in relation to paragraph 38 of Exhibit A4 where he indicated that 80% of coin operated Dexter machines are installed in laundromats and to paragraph 41 of the same statement to the effect that the remaining 20% are installed in shared laundry facilities.
(d) There was evidence also that a Primus 10kg machine (as set out previously a front
ATC 2419
loader) is not proportionately larger than a 7kg machine. Front loaders are conventionally used in Europe, while top loaders are used in the United States of America.(e) Mention was made of the fact that the objection decisions referred to a 10kg threshold as the cut-off point, whereas the Respondent in argument submitted that 8kg is the appropriate cut-off point. It may perhaps be that the reference to 10kg in the T Documents (T22) is no more than a reference to a customs standard.
(f) There was indeed some evidence which would tend to suggest that a 10kg machine is above the relevant dividing line; some of Mr Robinson's evidence might be said to be contradictory of Mr Jay's description of 10kg machines as ``babies''; see earlier comment in these Reasons and extracts from the transcript dated 16/3/99 at page 3; the Tribunal notes also:
- (1) A description in Exhibit A9 of 7kg, 10kg and 16kg Primus machines together (and see oral evidence of Mr Robinson at page 57 of the transcript dated 16/3/99); the Tribunal notes that a grouping of 7kg, 10kg and 16kg as being in the same category is of itself misleading; 7kg is, so the Respondent admits, below the line, while the 16kg machine is clearly much larger and in a different category; there is no suggestion by the Respondent that a 7kg machine falls above the dividing line. Nor is the use on occasions in overlapping fashion of general words such as commercial and industrial, to be regarded as being in any way determinative.
- (2) PJ9 (14th brochure) which describes a Primus 10 as an industrial washer/extractor and notes that the W10 is available with a programmable mechanism and a recessed coin box so as to deter vandalism.
(g) The distribution schedule indicates that while the 10kg machines are sold in fewer quantities than is the case with machines of smaller size, those sold are, nonetheless, installed predominantly in either shared premises or laundromats.
(h) As set out previously in these Reasons, the use of the term ``commercial'' in relation to the washing machines and dryers in this matter should not be given more significance than it deserves; similarly, the use of the term ``industrial'' on some occasions should also not be over-emphasised. And it follows, of course, that these words when used together should also not be accorded any particular significance.
(i) Mr Robinson's oral evidence referred to the photographic evidence at annexures TR10, TR11 and TR12 to his statement dated 9 October 1998 (Exhibit A3) depicting the equipment installed in a sample of laundromats. In those photographs the front loading Primus 10kg washing machines appear to be outnumbered by the top loading washing machines. That disproportion is confirmed by the table annexed as page 3 to Mr Robinson's statement dated 15 March 1999 (Exhibit A9). It records by model number and quantity the laundry equipment (including the Primus R10 10kg washing machines) installed in the laundromats, photographs of which are located in annexures TR10, TR11 and TR12 and referred to above. (As to certain corrections made to page 3 of the annexure to Mr Robinson's statement of 15 March 1999: see transcript 16/3/99 p 57-31).
(j) The Tribunal accepts that fewer Primus 10kg machines were sold than was the case with Maytag machines; however, the Primus 10kg models were installed either in shared accommodation or in laundromats. Of the Primus 10kg machines it is only the Primus R10 which was sold in significant numbers; 35 in 1996 and 34 in 1997. They were installed in shared accommodation and laundromats. The Applicant has conceded (and see clause 74(5) of the Applicant's Reply) that the evidence does not establish any particular pattern for the Primus W10 and F10 10kg machines. But the evidence does establish a pattern for the Primus R10 machines which are of the same capacity.
(k) Annexure TR10 is relevant in that it includes instructions in the use of the 10kg machines expressed in the same terms as are used for the Maytag machines.
(l) Mr Last visited only 7 retailers, 2 being of the same chain and with substantially the same stock (transcript 17/3/99 at page 49).
(m) The evidence indicates that there were at least 80 different domestic machines on the market; more than half use the words ``commercial'' or ``heavy duty'' on their control panels.
(n) There are brands with models comparably priced to Maytag (transcript 15/3/99 p 75-25). Harvey Norman sells Maytag and Fisher and Paykel as do other retailers. Mr Jay's oral
ATC 2420
evidence on the range includes the following (transcript 16/3/99 p 15):``... Well, I'm just asking you to have a look at the Fisher and Paykel advertisement in the Harvey Norman catalogue, and you see there that there's a range of machines in the... 6 to 800 [$] range? - Yes.
...
And they are the sort of machines that you would style as being home-style or single dwelling machines; is that right? - Yes.
The Maytag machine that you mention has a retail price of $1699, almost double if not a bit more than double; is that right? - Yes that's correct.
And sold into an entirely different market and meant to perform quite a different function altogether? - No that's not correct. It's - this is - we have to clear this. Its washing machines, $600 up to $2,000 - the Maytag and the Kleenmaid are at the top end of the range at $1,800 known for their robustness and reliability. The warranties on the Maytag and the Kleenmaid are longer than the life expectancy of these smaller cheaper machines.
That is the very thing that makes them entirely appropriate for use on a continuous basis in a heavy duty environment isn't it? - Yes. You get what you pay for.''
(o) The Applicant's Reply contains, in clause 88, what are referred to as basic specifications of a sample of machines in respect of which there was evidence, in the following terms:
``SOME TOP LOADING WASHING MACHINES
NOT TO BE TAKEN AS A REPRESENTATIVE SAMPLE
+-----------------------------------------------------------------------------------------------+
| Make/ | Height | Width | Depth | Weight | Cycles | Load | Price | Warranty |
| Model | mm | mm | mm | kg | No. | kg | $ | Years |
|-----------------------------------------------------------------------------------------------|
| Maytag | 1099 | 648 | 679 | 102 | 6 | 6 | 1,995 | 2 |
| MAT10CS | | | | crated | | | inclusive of | |
| (coin op) | | | | | | | 22% sales | |
| See product | | | | | | | tax cf. 12% | |
| description | | | | | | | (T15/3/99 | |
| under Exh | | | | | | | p 14-5) | |
| PJ9 to Exh A1 | | | | | | | | |
|-----------------------------------------------------------------------------------------------|
| Speed Queen | 1076 | 650 | 711 | 95 | 3 | 6 | n/a | n/a |
| SWT210 (coin | | | | | | | inclusive of | |
| op) | | | | | | | 22% sales | |
| See product | | | | | | | tax cf. 12% | |
| description | | | | | | | n/a | |
| at pp 31-35 | | | | | | | | |
| in annexures | | | | | | | | |
| to Exh A4 | | | | | | | | |
|-----------------------------------------------------------------------------------------------|
| Speed Queen | 1095 | 651 | 712 | 96 | 6 | n/a | 1390 | n/a |
| AWM392 | | | | | | | | |
|-----------------------------------------------------------------------------------------------|
| Maytag | 1100 | 648 | 680 | 91 | 7 | 6 | 1,495 | 5 |
| LAT5006 | | | | | | | (T 16/3/99 | `domestic' |
| | | | | | | | p 33-13) | 2 |
| | | | | | | | | `commercial' |
|-----------------------------------------------------------------------------------------------|
| Kleenmaid | 1095 | 651 | 712 | 96 | 6 | n/a | 1,799 | n/a |
| LWK74 | | | | | | | | |
| See Exh A13 | | | | | | | | |
|-----------------------------------------------------------------------------------------------|
| Whirlpool | 1095 | 670 | 720 | 71 | 7 | 7.5 | 850-1,300 | n/a |
| 6LSC9245 | | | | | | | | |
| EQ | | | | | | | | |
| See Exhibit | | | | | | | | |
| R3 | | | | | | | | |
|-----------------------------------------------------------------------------------------------|
| Hoover 800EL | 1050 | 668 | 740 | n/a | 9 | 8.0 | 850-1,300 | n/a |
| See Exhibit | | | | | | | | |
| R3 | | | | | | | | |
+-----------------------------------------------------------------------------------------------+
FRONT LOADING WASHING MACHINES
NOT TO BE TAKEN AS A REPRESENTATIVE SAMPLE
+-----------------------------------------------------------------------------------------------+
| Make/ | Height | Width | Depth | Weight | Cycles | Load | Price | Warranty |
| Model | mm | mm | mm | kg | No. | kg | $ | Years |
|-----------------------------------------------------------------------------------------------|
| Primus R6 | 1050 | 660 | 625 | 140 | 5 | 6.0 | n/a | n/a |
|-----------------------------------------------------------------------------------------------|
| Primus R7 | 1050 | 660 | 625 | 155 | 5 | 7.3 | n/a | n/a |
|-----------------------------------------------------------------------------------------------|
| Primus R10 | 1140 | 660 | 780 | 185 | 5 | 10.0 | n/a | n/a |
|-----------------------------------------------------------------------------------------------|
| Dexter T300 | 1114 | 660 | 630 | 146 | 4 | 8.11 | n/a | n/a |
|-----------------------------------------------------------------------------------------------|
| Dexter T400 | 1225 | 758 | 689 | 212 | 4 | 11.26| n/a | n/a |
|-----------------------------------------------------------------------------------------------|
| GE | 850 | 595 | 585 | n/a | 10 | 5.0 | 850-1,300 | n/a |
| WWH7604 | | | | | | | | |
|-----------------------------------------------------------------------------------------------|
| Whirlpool | 845 | 595 | 585 | n/a | 7 | 6.0 | 850-1,300 | n/a |
| 6AWM312 | | | | | | | | |
+-----------------------------------------------------------------------------------------------+
(p) And see also clauses 89 and 90 of the Applicant's Reply as follows:
``89 Though the Applicant denies it is relevant, it is submitted that having regard to the whole of the evidence there is no basis for any submission by the Respondent that the disputed laundry equipment is distinguishable in any uniform or material way except to say that it is at the larger, higher quality end of the range. From details tabulated - even notwithstanding the inadequacy of the sample - it is clear the disputed laundry equipment is neither the most expensive (when allowance is made for the sales tax rate penalty) nor uniformly the largest.
90 Further, to the extent to which the 10 kg Primus washing machines are larger than others in evidence, it is submitted that as they are on objective criteria ordinarily used for household purposes, they are by definition within the range though, together with the Dexter machines (and no doubt others), they may represent the upper end of it. The range reflected in the table is in any case incomplete for reasons already noted.''
The Tribunal is, in broad terms, in agreement with those submissions although it does note that in the evidence (in some respects confused) before it, the commercial machines and the 10kg machines appear to be more expensive (although not to any great extent) than the domestic machines, even apart from the differing sales tax treatment afforded to them.
125. On balance the Tribunal considers that the ``rubicon'' between commercial machines and (heavy duty) industrial washing machines is crossed at a level which is above 10kg. The most significant factor (in the view of the Tribunal) is the fact that the 10kg machine is generally (although not invariably) one which is coin-operated; coin-operated machines are needed, for obvious reasons, for household purposes, but equally and again for obvious reasons are not generally needed in machines employed for industrial purposes. A factory or hotel using its own laundry facilities will not need or desire a coin operation, which would in fact in these circumstances be a nuisance. By contrast, those machines used in shared premises or laundromats would frequently require the coin operation on the basis set out previously in these Reasons. In respect of the 10kg machines then (and while there is some evidence by Mr Robinson to the contrary), the Tribunal considers that the weight of evidence favours a conclusion that they are most aptly characterised as commercial machines, rather than as industrial machines. The Schedule also indicated that some of the 10kg machines are coin operated while some are of the push bar type; however the evidence was that all machines on the same line of the Schedule were very similar. In summary, it is the view of the Tribunal that in respect of the 10kg machines, the Applicant has made out a case, which although not as strong as its case in respect of the commercial machines, is entitled on the balance of probabilities to succeed.
126. Accordingly, the Tribunal finds that:
(a) The evidence strongly favours the conclusion that the commercial machines and the domestic machines are within the same genus or class, and that accordingly the
ATC 2422
commercial machines are entitled to the concessional rate.(b) The evidence in respect of the 10kg machines favours a conclusion, on the balance of probabilities, that they too are entitled to the concessional rate.
In all the circumstances, the objection decisions must be set aside.
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